Answer:
People should disregard schooling and thus work in the entire life period.
Explanation:
Condition 1--- Work throughout the 4 periods
The NPV =
= 27,272. 7 + 24,793.3 + 22,539.4 +20,490.4
= 95,095.8
Condition 2 - Attend school and work later
The NPV = -28,000 +
= -28000 + 41,322.31 + 37,565.7 + 34,150.6
= 85,038.61
Conclusion: Since the NPV of not going to school is higher, people should disregard schooling. They should work in the entire life period.
Answer:
Jacobs will earn $1,080,000
Explanation:
The earnings of the work factor are made up of two factors: Transfer Earnings + Economic Rents.
Transfer earnings are defined as the minimum required amount that a company must pay its workers to keep them in the workplace. Below this amount, the worker will leave his job. In this case, the Transfer Earnings are $ 80,000, which is the base salary of every designer.
On the other hand, the Economic Rents are the additional income that the worker receives and that is above the minimum level they need to supply his work (In this case, the additional income is given by Jacobs' special ability). In numerical terms, the Economics Rents amount is equivalent to the difference between the earnings obtained by the Jacobs company and the earnings obtained by the other companies.
That is: 1,500,000 - 500,000 = 1,000,000.
Therefore Jacobs salary is equivalent to 80,000 + 1,000,000 = 1,080,000.
From this, it can be deduced that approximately 92% of Jacobs' salary is equivalent to Economic Rents. From the theoretical point of view, this makes sense, because the demand for designers (which is a highly qualified profession) is very inelastic, and the more inelastic the greater the proportion of Economic Rents as part of the salary. In the annexes, I show it graphically.
