Public Finance (The McGraw-Hill Series in Economics)
10th Edition
ISBN: 9780078021688
Author: Harvey S Rosen, Ted Gayer
Publisher: McGraw-Hill Education
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Suppose that you decide to go to summer school. Your tuition cost is $3,000, books and
supplies cost $300, and room and board cost $1,000. You would not work while you
attend summer school.
If you did not go to summer school you would take a summer job which earns you
$5,000 for the summer and your cost of room and board in the summer would be $2,000.
Considering only this information, what is the dollar value of your total opportunity cost
of attending summer school?
3. Suppose a high schools graduate earns $40,000 per year while a college graduate makes $80,000.
Assume these wages will not change over time, and there are no other benefits to going to college.
Explicit costs of going to college (tuition, books, supplies, etc.) are $30,000 per year. Ignore the psychic
costs. The college education lasts four years. The retirement age is 65.
a. Say an 18 year-old decides to obtain college education. What can her annual discount rate be?
b. Say a 40 year-old has a discount rate of 5%. Will this person go to college?
16. You are thinking about going to graduate school to earn a master's degree, which you hope
will allow you to earn more money. Which of the following is NOT an incremental cash flow
associated with your decision to extend your schooling versus going into the workforce when
you finish your undergraduate degree?
A) the cost-of-living expenses, such as rent and food, while you are in graduate school
B) the cost of tuition
C) the lost income you could have earned by working rather than staying in school
D) the cost of books and other supplies required for your graduate studies
Chapter 7 Solutions
Public Finance (The McGraw-Hill Series in Economics)
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