Suppose that an MBA degree creates no externality because the benefits of an MBA are captured by the student in the form of higher wages. If the government offers subsidies for MBAs, then which of the following statements is correct?
A) The equilibrium quantity of MBAs will equal the efficient quantity of MBAs.
B) The equilibrium quantity of MBAs will be greater than the efficient quantity of MBAs.
C) The equilibrium quantity of MBAs will be less than the efficient quantity of MBAs.
D) The tuition paid by the student would be exceed the efficient amount.

Question

Quizplus · Accepted Answer

Subsidies would lead to more students pursuing MBAs than the efficient quantity, as the private benefit is already fully captured without externalities.

Suppose That an MBA Degree Creates No Externality Because the Benefits