Economics 92

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Whatcha gonna be when ya grow up?

Given your aspirations there are three career paths open to you: medicine, law and business.  You have to choose a strategic path.  The game of life might be pictured as

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If you go to med school then the probability of admission is .2 and the probability of rejection is .80.  The comparable admission probabilities are shown for the other two career paths.  Once admitted to med school the probability of becoming a neurosurgeon and earning $500,000 per year is .20.  Once admitted to an elite MBA program the probability of becoming an expert in high finance and earning $1,000,000 per year is .10. The whole game tree is read in a similar fashion.

 

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1. Upon admission to medical school, what are your expected earnings?.4(50)+.4(150)+.2(500)=180

2. Upon admission to law school, what are your expected earnings?.5(50)+.4(50)+.1(600)=105

3. Upon admission to business school, what are your expected earnings?.45(100)+.45(250)+.1(1000)=257.5

You are a college freshman (or sophomore) and must choose a curriculum.  The three choices are mutually exclusive.  That is, if you choose the pre-MBA curriculum, then your application to either law school or medical school will not be considered.

4. When choosing a curriculum, what are your expected earnings from choosing pre-med? .2(180)+.8(30)=60

5. When choosing a curriculum, what are your expected earnings from pre-law? .3(105)+.7(30)=52.5

6. When choosing a curriculum, what are your expected earnings from pre-MBA?.5(257.5)+.5(30)=143.75

7. Given your earlier answers, what career path should you choose?

medicine     law  business Business has the highest expected payoff.