The costs of obtaining a college degree for high-productivity and low-productivity workers are as follows:
High productivity: C_H = $20,000y
Low productivity: C_L = $40,000y
Where y is years in college. Suppose workers with a college degree are paid a lifetime income of $600,000, and workers without a college degree are paid a lifetime income of $450,000. For low-productivity workers, the net benefit of four years of college is _____, while the net benefit of not going to college is _____.

Question

Quizplus · Accepted Answer

The net benefit of four years of college for low-productivity workers is calculated by subtracting the cost of college ($40,000 per year for 4 years = $160,000) from the lifetime income with a degree ($600,000), resulting in $440,000. The net benefit of not going to college is simply the lifetime income without a degree, which is $450,000.

The Costs of Obtaining a College Degree for High-Productivity and Low-Productivity