Economics Principles For A Changing World
Economics Principles For A Changing World
4th Edition
ISBN: 9781464186660
Author: CHIANG, Eric P.
Publisher: Worth Publishers,
Question
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Chapter 13, Problem 1QP
To determine

The external benefits of college education.

Expert Solution & Answer
Check Mark

Explanation of Solution

The external benefit, which is also known as the positive externality, is enjoyed by a third party through an economic transaction. Education is one of the best examples of merit goods that generate an external benefit. The important external benefits of college education are given as follows:

  1. a) The creation of better-informed electorate: Quality education creates good citizens with better awareness about the society.
  2. b) The effects on reducing the number of crimes: Education helps to minimize the level of criminality. A person who spends his time for education reduces the time availability to engage in other activities.
  3. c) Increase in economic growth through higher production: Human capital is one of the important factors required for economic growth. Education improves the quality of human capital, which leads to a higher economic growth.
  4. d) Increase in tax revenue: The educated people or degree holders tend to earn more than who have not attended college. It would increase the tax revenue of government.
Economics Concept Introduction

External Benefit: The benefit attained by a person from an economic transaction in which he is not directly involved in it (positive externality).

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