What is the optimal schooling level for worker a

Reference no: EM13222931

There are two workers in the economy, "A" and "B"; "A" can go to school and "B" cannot. Education increases future income according to the following function: I(e)= 50(e)/(1+e)
Total cost per year of schooling equals 2, and thus: mc(e)=2

a. Derive the marginal income function.

b. What is the optimal schooling level for worker A ?
Suppose that educated workers also increase the productivity of a non-educated one, according to the following function: B(e)=e (I.e. the benefit for the non educated worker for each year of schooling studied by the educated worker is 1).

c. What is the optimal schooling level for worker A from the social point of view?

d. How can you achieve it?

e. Explain the difference between your answers to b. and c.

Reference no: EM13222931

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