Economics:
10th Edition
ISBN: 9781285859460
Author: BOYES, William
Publisher: Cengage Learning
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Chapter 27, Problem 11E
To determine
To discuss:
The subsidizing education as it generates a positive externality.
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Explain why economists might say that the market for higher education demonstrates externalities and market failure.
Explain why economists might say that the market for higher education demonstrates externalities and market fairlure.
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?
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- Explain the graph that I have provided about the PRIVATE COST and SOCIAL COST of EDUCATION.arrow_forwardExplain about the PRIVATE COST of EDUCATION.arrow_forwardWhich of the following illustrates the concept of externalaties? A. A hurricane destroys a production plant causing the owner of the plant to spend more money rebuilding B. Pollution by a coal mining plant causes a farmer to spend more money on fertilizer to improve his crop C. Increase in the price of sugar raises the price paid by consumers of soda, thereby disadvantaging these consumers D. Smoking harms the health of the smokerarrow_forward
- Show how a tax or subsidy can be used to counteract an externality,and discuss the pros and cons of such a solution.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_forwardIf education has private benefits to an individualas well as external benefits to society, explain whya less-than-optimal amount of education occurs.arrow_forward
- Is market failure either necessary or sufficient for government intervention?arrow_forwardPolicymakers 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? yearsarrow_forwardUsing a supply and demand diagram, demonstrate how a negative externality leads to market inefficiency. How might the government help to eliminate this inefficiency?arrow_forward
- Use a supply and demand graph to show a good which should be illegal owing to it's negative externality.arrow_forwardClassify 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_forwardExplain the concept of externalities; include an example, as well as how the government takes action to correct it.arrow_forward
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