The cost of obtaining a four-year degree is $120,000 for low-ability workers and $60,000 for high-ability workers. Suppose that workers without a four-year degree are paid lifetime wages of $500,000. For education to be an effective signal of ability, what range of lifetime earnings must be paid to workers with a four-year degree?

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The Answer of The cost of obtaining a four-year degree is $120,000 for low-ability workers and $60,000 for high-ability workers. Suppose that workers without a four-year degree are paid lifetime wages of $500,000. For education to be an effective signal of ability, what range of lifetime earnings must be paid to workers with a four-year degree?

The Cost of Obtaining a Four-Year Degree Is $120,000 for Low-Ability