Myeconlab With Pearson Etext -- Access Card -- For Microeconomics
9th Edition
ISBN: 9780134143071
Author: PINDYCK, Robert, Rubinfeld, Daniel
Publisher: PEARSON
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Question
Chapter 15, Problem 11RQ
To determine
Consumer trade off current and future costs.
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Why would planned investments might be different than actual investments? And what does it mean?
I'm not sure if the answer would be A or C because GPD has increased since then.
Joanne has just completed high school and is trying to determine whether to go to communtiy college for two years or go directly to work. Her objective is to maximize the savings she will have in the bank five years from now.
If she goes directly to work, she will earn $18,500 per year for each of the next five years. If she goes to community college, for each of the next two years she will earn nothing—indeed, she will have to borrow $6,000 each year to cover tuition and books. This loan must be repaid in full three years after graduation. If she graduates from community college, in each of the subsequent three years, her wages will be $35,000 per year. Joanne’s total living expenses and taxes, excluding tuition and books, equal $15,000 per year.
Joanne should go to (Click to select) work junior college , since the total value of Joanne's savings would be $__ if she goes directly to work and $__ if she goes to community college.
Chapter 15 Solutions
Myeconlab With Pearson Etext -- Access Card -- For Microeconomics
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- Write the net present or future worth expression?arrow_forwardDefine the term Net Present Worth?arrow_forwardJoanne has just completed high school and is trying to determine whether to go to junior college for two years or go directly to work. Her objective is to maximize the savings she will have in the bank five years from now. If she goes directly to work, she will earn $22,000 per year for each of the next five years. If she goes to junior college, for each of the next two years she will earn nothing—indeed, she will have to borrow $6,000 each year to cover tuition and books. This loan must be repaid in full three years after graduation. If she graduates from junior college, in each of the subsequent three years, her wages will be $41,000 per year. Joanne’s total living expenses and taxes, excluding tuition and books, equal $15,000 per year. Instructions: Enter your responses as whole numbers. a. Suppose, for simplicity, that Joanne can borrow and lend at 0 percent interest. On purely economic grounds, should she go to junior college or work? After 5 years, the total value of…arrow_forward
- Joanne has just completed high school and is trying to determine whether to go to junior college for two years or go directly to work. Her objective is to maximize the savings she will have in the bank five years from now. If she goes directly to work, she will earn $22,000 per year for each of the next five years. If she goes to junior college, for each of the next two years she will earn nothing—indeed, she will have to borrow $6,000 each year to cover tuition and books. This loan must be repaid in full three years after graduation. If she graduates from junior college, in each of the subsequent three years, her wages will be $41,000 per year. Joanne’s total living expenses and taxes, excluding tuition and books, equal $15,000 per year. Instructions: Enter your responses as whole numbers. a. Suppose, for simplicity, that Joanne can borrow and lend at 0 percent interest. On purely economic grounds, should she go to junior college or work? After 5 years, the total value of…arrow_forwardempirical evidence that suggest that many consumers tend to spend all of their current disposable income immediately. Is this irrational?arrow_forwardDescribe nonsimple investment?arrow_forward
- Abigail, an analyst with a venture capital firm, is approached by Tomas about financing his new business venture, a company that will produce solar-powered hydroponic growing equipment for light industrial use. What information should Abigail have before making a decision about financing Tomas’s new company?arrow_forwardElroy Harris is considering whether to buy a corn and soybean farm in Iowa. The farm will cost $800,000, and Xander will be able to pay this from profits his recently deceased mother made on the stock market and willed to him. He estimates that if he does not run the farm, and keeps his current job as an economic forecaster, he will be able to earn $40,000 a year. The prevailing interest rate is 9 percent. Xander’s only motive is to maximize his income. His accountant tells him the annual profit from the farm is likely to be depending on certain conditions and assuptions: Scenario i) $160,000 of accounting profit Scenario ii) $100,000 of accounting profit Scenario iii) $50,000 of accounting profit Using the concept of positive economic profit, which of the three scenarios would the economic opportunity cost justify him taking up farming and quitting his job as an economic forecast. Show your work and calculationsarrow_forwardDescribe the process of Calculating Present Value?arrow_forward
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