Education benefits society as a whole. That is why, among other things, studies at colleges and universities are subsidized: Students pay for the semester ticket, while the state covers the cost of courses, among other things. Assume that the subsidy is paid as a fixed amount per student. 4a) What is the form of market failure that economically justifies the education subsidy? Briefly justify your answer. 4b) What is the effect of the subsidy and what are its welfare effects? Assume an optimally designed subsidy and give reasons for your answer. 4c) Does it make a difference whether the subsidy is earmarked and paid directly to the students or to the respective university? Give reasons for your answer.
fourth task)
Education benefits society as a whole. That is why, among other things, studies at colleges and universities are subsidized: Students pay for the semester ticket, while the state covers the cost of courses, among other things. Assume that the subsidy is paid as a fixed amount per student.
4a) What is the form of market failure that economically justifies the education subsidy? Briefly justify your answer.
4b) What is the effect of the subsidy and what are its welfare effects? Assume an optimally designed subsidy and give reasons for your answer.
4c) Does it make a difference whether the subsidy is earmarked and paid directly to the students or to the respective university? Give reasons for your answer.
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