ch4 Investment in Human Capital spring 2025

An investment in human capital involves _____current_____ costs and _______future___ benefits.

current; future

The costs of investing in human capital include __________ and __________ costs.

direct; opportunity

Direct costs of human capital investment may include __________, __________, and __________.

tuition; fees; books

The economic benefits of investing in college education typically include __________ future flow of earnings.

enlarged

The present value of earnings is calculated by discounting future net earnings to their __________ value.

today's

A person should attend college if the net present value (Vp) is __________ than 0.

greater

The screening hypothesis suggests that educational attainment may serve as a means to __________ high quality workers.

identify

Higher costs of human capital investment are likely to decrease __________ to college.

enrollment

The college-high school wage premium seems to be affected by the __________ and __________ of graduates.

supply; demand

The law of diminishing returns states that as additional education is acquired, the __________ rate of return to education declines.

marginal

Both firms and workers will invest in on-the-job training if the present value of the __________ exceed the present value of the __________ they bear.

benefits; costs

General training is training that is usable at __________ firms and industries, while specific training is unique to __________ firm.

all; one

The decision rule for investing in human capital requires that the marginal rate of return of schooling (r) equals the __________.

interest rate (i)

Higher opportunity costs make older individuals __________ likely to invest in human capital.

less

Economic benefits related to human capital investments include __________, job stability, and less reliance on social welfare programs.

higher earnings

In markets with imperfect information, lenders may favor __________ capital over human capital due to repossession issues.

physical

Investments in human capital often yield both private and __________ benefits to society.

social

If incremental earnings are partly due to greater ability or personal characteristics, the rate of return to college education might be __________.

overstated

The marginal internal rate of return (r) measures the extra __________ from additional education for a specific person.

return

Ceteris paribus, a longer stream of incremental earnings will likely lead to a __________ net present value.

positive

A rational employer will only hire a worker if the marginal revenue product (MRP) is __________ than the marginal wage cost (MWC).

greater