If education creates positive externalities,
A)private markets provide less than the socially optimal quantity of education
B)private markets provide more than the socially optimal quantity of education
C)the marginal private benefit curve is higher than the marginal social benefit curve
D)the marginal private cost curve is higher than the marginal social cost curve
E)the government should impose a depletion tax

Question

Quizplus · Accepted Answer

When education creates positive externalities, private markets provide less than the socially optimal quantity of education. This is because individuals only consider the private benefits of education, such as higher earnings, better job opportunities, etc., and do not take into account the positive spillover effects of education, such as improved public health, reduced crime rates, and increased social cohesion. As a result, the market underproduces education, and the government may need to intervene to ensure that the socially optimal level of education is provided.

If Education Creates Positive Externalities