Suppose that capital markets are imperfect and some workers face borrowing constraints (cannot obtain loan to finance their education at the market interest rate). What will be the relationship between marginal benefit and marginal costs of education for these workers? (a) The marginal benefit of an additional year of schooling will be equal to the marginal cost. (b) The marginal benefit of an additional year of schooling will be higher than the marginal cost.

Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506725
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter27: Investment, The Capital Market, And The Wealth Of Nations
Section: Chapter Questions
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Suppose that capital markets are imperfect and some workers face borrowing constraints (cannot obtain loan to finance their education at the market interest rate). What will be the relationship between marginal benefit and marginal costs of education for these workers?

(a) The marginal benefit of an additional year of schooling will be equal to the marginal cost.

(b) The marginal benefit of an additional year of schooling will be higher than the marginal cost.

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