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    relation between the years of schooling and the annual earnings

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    2. Andre's wage-schooling locus can be described by the following table

    Years of Schooling Annual Earnings
    11 22,000
    12 30,000
    13 35,000
    14 38,000
    15 40,000
    16 41,000
    17 41,500
    18 41,700

    (a) Depict the wage-schooling locus on a graph.
    (b) Derive the marginal rate of return to schooling curve. Depict on a graph as completely as possible.
    (c) Would this person finish the 12th grade if their discount rate was 15%? Explain.
    (d) Would this person finish the 16th grade if their discount rate was 3%? Explain.
    (e) How would either decision change if the government imposed a 20% tax on earnings and interest income?
    (f) What would happen if the government exempted interest income?

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