1. According to the signaling theory of education, a. The level of education or
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Question
1. According to the signaling theory of education,
a. The level of education or training directly measures the productivity of the worker.
b. Education and training function as utility-generating goods from the worker's perspective.
c. Education and training do not contribute directly to productivity, but act as a filter to screen candidates.
d. The social rate of return to education is greater than the private rate of return.
2. The essence of human capital theory is that:
a. Firms spend money on their capital stock and equipment in order for labour to become more productive.
b. Investments are made in human resources so as to improve their productivity and, therefore, their earnings.
c. All workers who want to increase their salary should obtain a university diploma.
d. Workers invested in higher education in order to send a signal to potential employers regarding their underlying ability.
3. The opportunity cost of obtaining human capital is:
a. the job experience lost while attending school.
b. the direct cost of books, supplies, and tuition fees.
c. the income foregone while acquiring it.
d. the estimate of the increase in salary that results from the acquisition of skills.
4. The shape of the "age-earnings" profiles reflect all of the following, except that:
a. earnings tend to increase with age but at a deceasing rate.
b. individuals generally continue to make human capital investments in the form of on-the-job training and work experience once they have entered the labour force.
c. the earnings of individuals with higher levels of education are generally higher than those with fewer years of education.
d. older, more experienced workers have higher wage profiles than younger workers.
5. In the context of investments in human capital, perfect capital markets imply all of the following, except that:
a. An individual weighs the costs against the benefits based on certain ways of calcuating them.
b. An individual can base his/her human capital decision on total lifetime income.
c. An individual faces no liquidity constraints as they can borrow against expected future income.
d. An individual makes an investment decision based on his/her current income.
6. The decision to invest in human capital does not involve which of the following?
a. The costs of tuition and books
b. Forgone earnings
c. Projected earnings
d. None of the choices are correct.
7. The rule for optimal human capital investment is that:
a. the individual should increase years of education until the discounted present value of the benefits of an additional year of education equals the discounted present value of the additional costs.
b. the individual should increase years of education until the discounted present value of the benefits of an additional year of education is less than the discounted present value of the additional costs.
c. the individual should increase years of education until the discounted present value of the benefits of an additional year of education is greater than the discounted present value of the additional costs.
d. the individual should increase years of education until the discounted present value of the benefits of all of the years of education equals the discounted present value of all of the associated costs.
Explanation / Answer
Answer 1. According to signalling theory of education education and training do not contribute directly to the productivity, but act as a filter to screen candidates. It means that they are not able to increase the productivity or knowledge of the workers in this scanerio. The productivity of the factory cannot be influenced by education.
Answer 2 The essence of human capital theory is that investment are made in human resources. It means that productivity may be increased by education , training and healthcare provided to individual with more human capital for business.
Answer 3. The oppournity cost of obtaining human capital is that the income foregone while acquiring it and the cost of books, supplies and tution fees. All this should be included in the cost of the human capital formation in the business scanerio.
Answer 4. The shape of age earning profile reflect all that of the following except that individual generally continoue to make human capital investment in the form of on-the job training and work experience as once they have entered in the labour market. It means that education is directly related to wages of the person and higher educated gain maximum wages in there career.
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