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, $8, 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. Provide your answer below: 18 16- 14 S (MPC) 12 10 -8 Market Equilibrium (800,8) Social Equilibrium (800 8) -6 4- 2- D (MPB) 1400 1000 1200 Quantity (in thousands of college degrees) -200 0 200 400 600 800 16001800 Price (in thousands of $)

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, $8, 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. Provide your answer below: 18 16- 14 S (MPC) 12 10 -8 Market Equilibrium (800,8) Social Equilibrium (800 8) -6 4- 2- D (MPB) 1400 1000 1200 Quantity (in thousands of college degrees) -200 0 200 400 600 800 16001800 Price (in thousands of $)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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