Because there are external benefits from higher education:
A) private markets will oversupply college classes.
B) government intervention cannot improve the market for college classes.
C) the government should impose a tax on college students.
D) private markets will undersupply college classes.

Question

Quizplus · Accepted Answer

External benefits refer to benefits that are enjoyed by society as a whole, beyond the individual who receives the education. One example of an external benefit of higher education is a more skilled and productive workforce, which can lead to economic growth and higher tax revenue. Because private markets may not fully capture these external benefits in their pricing, they are incentivized to undersupply college classes. Thus, government intervention may be necessary to ensure that the market supplies an optimal level of higher education. The other options (A, B, and C) are not supported by economic theory or evidence.

Because There Are External Benefits from Higher Education