Answer to Question #232230 in Microeconomics for Surya bhai

Question

Suppose that it costs $40,000/yr to get an MBA degree and that non MBAs expect to earn $60,000/yr while MBAs earn $80,000/yr. Assuming an MBA takes two years to finish and that all other costs are negligible, are wages and tuitions in equilibrium (i.e. would your average person strictly prefer one activity (getting an MBA) over another activity (not getting an MBA?). If not, how will markets adjust?

Answer 1

My average person in this case would strictly prefer one activity so as to advance on the other events when the rest of the expenses to be incured are settled. Getting more activities despite being a save of time and other expenses, it may include overstretching the budget.