Microeconomics (MindTap Course List)
10th Edition
ISBN: 9781285859484
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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The terms spillover or externality refer to__A) black-market economic activity.B) the impact on markets of imported goods.c) the cost or benefit of a market activity borne by a third party.D) the inequitable distribution of income.
Explain why economists might say that the market for higher education demonstrates externalities and market failure.
Suppose a positive externality is associated with college enrollment. Assume that college instruction is sold in a competitive market and that the marginal social cost of providing it increases with enrollment. Show how a corrective subsidy to college students will increase the market price of instruction. Show the net gain in well-being possible from the subsidy and the amount of tax revenue required to finance its costs on your graph.
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Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism.
Answer completely.
You will get up vote for sure.
Chapter 13 Solutions
Microeconomics (MindTap Course List)
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- (Optimal Provision of Public Goods) Using at least two individual consumers, show how the market demand curve is derived from individual demand curves (a) for a private good and (b) for a public good. Once you have derived the market demand curve in each case, introduce a market supply curve and then show the optimal level of production.arrow_forwardEducation confers many external benefits on society: a higher-paid workforce, more technological innovation, a more informed electorate, and so on. Therefore, the market equilibrium quantity of education is not equal to the socially optimal quantity. The following graph shows the demand for education (its private value), the supply of education (the private cost of producing it), and the social value of education, including both the private value and external benefits. Use the black point (plus symbol) to indicate the market equilibrium quantity. Next, use the purple point (diamond symbol) to indicate the socially optimal quantity.arrow_forwardWhich of the following is a positive externality from education? a.Better-educated people make their coworkers more productive. b.Better-educated people tend to earn higher wages. c.Better-educated people live longer than less educated people. d.Better-educated people are less likely to vote and participate in a democracy.arrow_forward
- What is a market-failure rationale for the government investing in education and training programs? a. Education likelyresults in a negative externality in production, so government investment corrects for the under-provision by private, unregulated markets. b. Education likely results in a positive externality in consumption, so government investment corrects for the under-provision by private, unregulated markets. c. Education likely results in a positive externality in production, so government investment corrects for the over-provision by private, unregulated markets. d. Education likely results in a negative externality in consumption, so government investment corrects for the over-provision by private, unregulated markets.arrow_forwardIs 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?arrow_forwardConsider the graph illustrating the supply, the demand, and the marginal social benefit (MSB) curves for one year of a university education. 1.Value of subsidy per student is... 2. New price is...arrow_forward
- Explain why economists might say that the market for higher education demonstrates externalities and market fairlure.arrow_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_forwardExplain how subsidies provided by the government to producers solve their externalitiesarrow_forward
- What is the deadweight loss that results from this externality? QE − Q* PC − PE PC − PP (PC − PP) x QE (PC − PP) x (QE − Q*) x one half Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.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_forwardExplain how a tax or subsidy might be used to “correct” for the inefficiency of a market equilibrium in the presence of an externality.arrow_forward
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