The figure below shows the market for higher education. The market demand curve for higher education reflects only the marginal private benefit (MPB) that individuals receive. Since this is a market with positive externalities, suppose the government provides a subsidy to consumers of higher education (students) that is equal to the marginal social benefit (MSB) minus the marginal private benefit (MPB), in this case, $6,000 per student. With the subsidy, the demand curve will shift and become the same as the marginal social benefit (MSB) curve. Move the demand curve below to illustrate this shift. Be sure to take the exact size of the subsidy into account. Precise answers are required.
The figure below shows the market for higher education. The market demand curve for higher education reflects only the marginal private benefit (MPB) that individuals receive. Since this is a market with positive externalities, suppose the government provides a subsidy to consumers of higher education (students) that is equal to the marginal social benefit (MSB) minus the marginal private benefit (MPB), in this case, $6,000 per student. With the subsidy, the demand curve will shift and become the same as the marginal social benefit (MSB) curve. Move the demand curve below to illustrate this shift. Be sure to take the exact size of the subsidy into account. Precise answers are required.
Chapter27: Markets And Government
Section: Chapter Questions
Problem 12E
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![The figure below shows the market for higher education. The market demand curve for higher education reflects only the
marginal private benefit (MPB) that individuals receive. Since this is a market with positive externalities, suppose the
government provides a subsidy to consumers of higher education (students) that is equal to the marginal social benefit
(MSB) minus the marginal private benefit (MPB), in this case, $6,000 per student. With the subsidy, the demand curve will
shift and become the same as the marginal social benefit (MSB) curve.
Move the demand curve below to illustrate this shift. Be sure to take the exact size of the subsidy into account. Precise
answers are required.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F2eb334d1-eea1-4da7-9551-e02858c96b00%2F73136d66-493a-4acb-965e-9b372a53eae4%2Fdt9ry5b_processed.jpeg&w=3840&q=75)
Transcribed Image Text:The figure below shows the market for higher education. The market demand curve for higher education reflects only the
marginal private benefit (MPB) that individuals receive. Since this is a market with positive externalities, suppose the
government provides a subsidy to consumers of higher education (students) that is equal to the marginal social benefit
(MSB) minus the marginal private benefit (MPB), in this case, $6,000 per student. With the subsidy, the demand curve will
shift and become the same as the marginal social benefit (MSB) curve.
Move the demand curve below to illustrate this shift. Be sure to take the exact size of the subsidy into account. Precise
answers are required.
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