a. If people base their education decisions only on the marginal private benefit of education, how many years of education will they choose to get? b. What is the socially optimum number of years of education people should get? c. If the government decides to provide a subsidy to every student in order to encourage them to get the socially optimal number of years of education, how much, per year, does this subsidy have to be? /

a. If people base their education decisions only on the marginal private benefit of education, how many years of education will they choose to get? b. What is the socially optimum number of years of education people should get? c. If the government decides to provide a subsidy to every student in order to encourage them to get the socially optimal number of years of education, how much, per year, does this subsidy have to be? /

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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4. Exhibit 17-8 represents the consumer market for higher education.
Exhibit 17-8
dollars per
year
marginal
45,000
cost
40,000
35,000
30,000
5,000
20,000
marginal social
benefit
15,000
10,000
marginal private
1
4 5
6
7
years of higher
education
a. If people base their education decisions only on the marginal private benefit of education, how
many years of education will they choose to get?
b. What is the socially optimum number of years of education people should get?
c. If the government decides to provide a subsidy to every student in order to encourage them to get
the socially optimal number of years of education, how much, per year, does this subsidy have to
be?/
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