A college education creates positive externalities. Use the accompanying graph which represents the hypothetical market for a college education in the land of Smartypants to answer the questions that follow. MSB stands for marginal social benefit, MPB stands for marginal private benefit, and MPC stands for marginal private cost. Market for College Education 1. Move point E to the efficient equilibrium outcome. 2. If the government of Smartypants Wanted to subsidize college education, how much would it subsidize each student to achieve the socially optimal level of education? MSB 30 100

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Comparative Advantage and Absolute Advantage Analysis

The theory of absolute advantage was given by Adam Smith in the year 1776.