Bundle: Microeconomics, Loose-leaf Version, 10th + Mindtap Economics, 1 Term (6 Months) Printed Access Card
10th Edition
ISBN: 9781305782570
Author: William Boyes; Michael Melvin
Publisher: Cengage Learning
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Chapter 13, Problem 12E
To determine
To explain:
The best solution to solve positive externality in education is to provide a subsidy and the education system in all countries government entity is to be determined.
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Students have asked these similar questions
Is education a public good? Does education have external benefits? If so, what are some of those public benefits? In your opinion are the external benefits large or small? Why?
What should government do to promote the efficient provision of products that have external benefits? If you think that government should put more resources into education, what might be some of the opportunity costs of that decision? How would an economist determine the right amount of government support for education?
Explain why economists might say that the market for higher education demonstrates externalities and market failure.
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
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70
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50
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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
Chapter 13 Solutions
Bundle: Microeconomics, Loose-leaf Version, 10th + Mindtap Economics, 1 Term (6 Months) Printed Access Card
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Similar questions
- Classify each statement as a positive externality associated with education or a negative externality associated with education. Positive externalties of education Negative externalities of education Answer Bank a higher voter participation rate reduced welfare dependency an increased standard of living lower crime ratesarrow_forward3. How does the optimal size of the subsidy for education vary with the size of the (positive) consumption externality? Justify your answer graphically.arrow_forwarda)Some advocates of anti-poverty programs claim that fighting poverty is a public good. Explain what these advocates mean by classifying charity as a public good. b)Why do governments tend to run programs that help the poor? Can the private sector be left to run those programs? Discuss your answer by focusing on externalities and market failurearrow_forward
- How does providing education to students provide external benefits to everyone in the community.arrow_forwardMost 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…arrow_forwardMost 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.arrow_forward
- 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…arrow_forwardKnowledge creates positive externality; therefore, governments should intervene in the education sector. What is the intervention action of governments for efficiency to gain from external benefits? Please explain each of these interventions with a clear example for each.arrow_forwardConsider the education market of a country which is perfectly competitive. The demand equation for education is given by P = 14 - 2Q and the supply equation of education is given by P = 2 + Q. (i) Assume that education is able to generate a positive external benefit of 3 per unit. Examine the education market and explain why the market is inefficient. Compute the deadweight loss and support your answers with an education market diagram. (ii) What should the government do to restore efficiency in the education market. Explain.arrow_forward
- Identify one market failure and explain the solution. Include the role of the government in addressing the particular problem.arrow_forwardIf education has private benefits to an individualas well as external benefits to society, explain whya less-than-optimal amount of education occurs.arrow_forwardQuestion 6 U SB G S E I 50 80 120 150 Consider the market for education. Education has an external benefit. The graph above shows the supply and demand curves as well as the social benefit curve in the market. Refer to the graph to answer the following questions: • If the government does not interfere in the functioning of this market, the quantity traded in the market is • The socially optimal quantity is • The outcome that takes into account the external benefit of education is • In the presence of a positive externality and without government interfer produces ket Point E Point F ◆ compared to the socially optimal quar Point G Point H Check H --arrow_forward
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