What is the socially optimal number of years of schooling for each citizen?optimal schooling: 14yearsAssuming that the marginal social benefits of education are completely externalized from the educated individual, how largewould a Pigouvian subsidy need to be in order to reach this optimal level of schooling?Pigouvian subsidy: $thousand Policymakers realize that, although education creates a positive benefit for those who obtain it, it also creates external benefitsfor the community where the educated individual resides. The graph depicts the marginal social cost (MSC) and the marginalsocial benefit (MSB) associated with education.On the graph, move the point, P, to the point representing the optimal level of education.Dollars (thousands)1009080706050403020100024MSCMSB6 8 10 12 14 16 18 20 22Years of schoolingoptimal schooling: 14What is the socially optimal number of years of schooling for each citizen?years

Externality refers to the situation of a person engaging in activities that may influence the…

What is the socially optimal number of years of schooling for each citizen? optimal schooling: 14 Pigouvian subsidy: $ years Assuming that the marginal social benefits of education are completely externalized from the educated individual, how large would a Pigouvian subsidy need to be in order to reach this optimal level of schooling? thousand

What is the socially optimal number of years of schooling for each citizen? optimal schooling: 14 Pigouvian subsidy: $ years Assuming that the marginal social benefits of education are completely externalized from the educated individual, how large would a Pigouvian subsidy need to be in order to reach this optimal level of schooling? thousand

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Related questions

Q: What price and quantity will the firm in the diagram above produce? What’s the socially-optimal…

A: The firms produce at a point where the MPC(Marginal Private Cost) = MPB(Marginal Private Benefit) or…

Q: P SB E H F III G 50 80 120 150 Consider the market for education. Education has an external benefit.…

A: Externalities are the side effects which are borne by the parties who are not directly involved in…

Q: Show and explain how the distribution/allocation constraints are satisfied by any point in an…

A: The Edgeworth box graphically depicts the benefits that can be gained from a pure trade of goods,…

Q: Suppose that in the midst of a financial crisis, Mr Burns is forced to sell the SNPP to wealthy…

A: a. Negative externality exists when production and consumption of any good poses a negative effect…

Q: discuss the argument that education should be subsidized because it creates a positive externality

A: Externality is the negative or positive spillover by the consumer or producer which affects the…

Q: ost countries today have subsidised the provision of education. Consider an imaginary country,…

A: Solving 1 to 3 combined

Q: Most countries today have subsidised the provision of education. Consider an imaginary country,…

A: Note:- Dear learner you have posted a question with multiple sub parts, as per our policy we will…

Q: A B D OD C 08 Qi The figure above shows a market for gasoline with a price ceiling equal to $2.75.…

A: Demand is the willingness and ability of consumers for consuming and buying goods and services at…

Q: Refer to Table 13-9. What is variable cost when output equals 30 units? Select one: O a. $90.00 O b.…

A: Since you have asked multiple question, we will solve the first question for you. If you want any…

Q: What is the importance of equitable in the financing of public education?

A: In regard to education, equity, and equality are two distinct terms. Equality refers to the equal…

Q: The table below describes the market for higher education. Higher education confers positive…

A: A positive externality is a benefit that is enjoyed by a third party as a result of an economic…

Q: Explain how providing education to all children in grades K-12 provides external benefits to…

A: We show thatt the positive externality is when the bystander bears the advantage of any activity.…

Q: How can government correct inequalities in the market’s resource allocation? Consider means-tested…

A: Governments can correct inequalities in the market's resource allocation through various policy…

Q: The private market for education can be considered a market failure because it leads to a price of…

A: Externality refers to the effect of consumption or production of a good on the third party. There…

Q: Undervaluing the substitution effect in calculating social welfare costs would overestimate the…

A: The substitution effect is a concept from economics that explains why a buyer increases, decreased,…

Q: The below graph shows the optimal level of human capital acquisition for a 30-year old. On the same…

A: This can be defined as a cost that shows the type of cost that an individual, business, or any other…

Q: Alex, Kara, and Susie are the only three people in a community. Alex is willing to pay $40 for the…

A: Public goods: A public good is a commodity or services which are provided to all members of the…

Q: Education provides both private benefits to those who receive it and broader social benefits for the…

A: Externality is the negative or positive spillover by the consumer or producer which affects the…

Q: How does the optimal size of the subsidy for education vary with the size of the (positive)…

A: An externality refers to the impact of one person's actions on the well-being of a bystander. The…

Q: Given extremely high rates of obesity, diabetes and cancer, should the U.S. Government implement or…

A: Introduction Externality occur is an economy when the production or consumption of a specific good…

Q: The attached figure indicates the initial market for tertiary education in a country that pays a…

A: The equilbrium price and quantity of a good sold in the market are determined by the forces of…

Q: What discount rates should be used for valuing future benefits and costs in social cost-benefit…

A: The SCBA {"social cost-benefit analysis"} is described as a decision that weighs and measures the…

Q: Consider a two-period dynamic resource allocation problem where the efficient allocation of a…

A: The ideal distribution of all resources in society, taking into consideration all internal and…

Q: Knowledge creates positive externality; therefore, governments should intervene in the education…

A: Positive externality occurs when the consumption or production of a good causes a benefit to a third…

Question

What is the socially optimal number of years of schooling for each citizen?
optimal schooling: 14
years
Assuming that the marginal social benefits of education are completely externalized from the educated individual, how large
would a Pigouvian subsidy need to be in order to reach this optimal level of schooling?
Pigouvian subsidy: $
thousand

Policymakers realize that, although education creates a positive benefit for those who obtain it, it also creates external benefits
for the community where the educated individual resides. The graph depicts the marginal social cost (MSC) and the marginal
social benefit (MSB) associated with education.
On the graph, move the point, P, to the point representing the optimal level of education.
Dollars (thousands)
100
90
80
70
60
50
40
30
20
10
0
0
2
4
MSC
MSB
6 8 10 12 14 16 18 20 22
Years of schooling
optimal schooling: 14
What is the socially optimal number of years of schooling for each citizen?
years

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1: Externality:

VIEW

Step 2: Optimal level of schooling:

VIEW

Step 3: Subsidy required:

VIEW

Solution

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 4 steps with 1 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

Suppose that a very small town has 174 people. Mosquito control is a pure public good. Each individual has an identical preference about the mosquito control, given by MB = 50 - G, where MB is their marginal benefit from mosquito control and G is the quantity of mosquito control. If the cost of mosquito control is $250 per unit, then the socially optimal level of mosquito control is units. (Answer up to 2 decimal places.)
Most countries today have subsidised the provision of education. Consider an imaginary country, Gondolin. Gondolin pays a subsidy of $10 000 per year to each student enrolled in tertiary education.(a) Depict, with the help of a figure, the initial market for tertiary education in Gondolin, assume that: 1) education was left to the competitive free market; 2) the marginal private benefit is equal to the marginal social benefit; 3) the marginal private cost is equal to the marginal social cost. Now describe, using the help of the figure, the effect of the government subsidy on the price and quantity traded of tertiary education, where the X axis of the figure should be the quantity of students enrolled in tertiary education. You do not need to use actual numbers – focus on the direction of change in price and quantity traded caused by the subsidy.(b) Identify the area of the figure you drew in (a) that depicts the total size of the subsidy paid by the government to the students enrolled…
Suppose that in an effort to help low-skill workers the government raises the permissible minimum wage to $15 per hour. Can you think of any unintended secondary effects that will result from this action? Will all low-skill workers be helped by minimum wage law?
Provide a graphical representation of a negative supply-side externality that identifies the market failurein terms of both price and quantity.
How does education, as an area of government spending, both positively and negatively impact a business?
Insurance premiums are very high for young drivers largely due to the fact that young drivers get into more automobile accidents than other drivers. Do you think that it is fair that young people are charged more for the same insurance that other drivers have? Is it fair that regardless of how good of a driver is, just because a driver is young he or she is charged more for their car insurance?
Q=100-P Costs $6 to purchase a pack of cigarettes each pack smoked does $6 worth of health damage and $5 worth of secondhand health damage All consumers are aware of these costs 1. Due to an introduction of a hyper-effective tobacco fertilizer, the cost of producing a pack of cigaretts decreases to $1. How does this affect the level of smoking and the level of social loss? 2. suppose the government decides to pursue a Pigovian solution to eliminte social loss. What sort of of tax or subsidy would they implement and what is the resulting quantity of cigarette packs purchased? 3. In the case of the Coase Theorem, it is said that the socially efficient level of smokeing will occur without government intervention. how are property rights established and why might the Coase Theorem not apply in this setting?
Suppose the production of widgets causes a negative externality of $12 per unit. The current market price is $20 and market quantity is 35 units. What should be the correct Pigovian tax to correct the negative externality?
The table shows the demand for university education. The marginal cost of educating a student is a constant $4,000 a year and education creates an external benefit of a constant $2,000 per student per year. If all universities are public, calculate the tuition that will achieve the efficient number of students. How much will taxpayers have to pay?
The table below shows cost data for producing different amounts of higher education. The market for higher education produces positive externalities in the form of more informed voters and higher rates of technological growth. Use the given information to answer the questions below. Price Supply Private Demand Private+Social Demand 63 76 102 15 70 70 96 28 77 64 90 41 84 58 84 54 91 52 78 How much higher education would we expect to be produced in the free market? What is the socially optimal output of higher education? F12 F10 11 F9
No old
If education has private benefits to an individualas well as external benefits to society, explain whya less-than-optimal amount of education occurs.