A college education creates positive externalities. Use theaccompanying graph which represents the hypothetical marketMarket for College Educationfor a college education in the land of Smartypants to answer100Ethe questions that follow. MSB stands for marginal social90benefit, MPB stands for marginal private benefit, and MPC80stands for marginal private cost.SMPC701. Move point E to the efficient equilibrium outcome.602. If the government of Smartypants wanted to subsidizecollege education, how much would it subsidize each50student to achieve the socially optimal level of40education?3020DMSB10DMPB102030405060708090100Number of students (in thousands)Price per year ($1000s)

Externalities refer to the cost or benefit of an economic transaction incurred on a third party who…

Answered: A college education creates positive…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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