If a positive externality is associated with college enrollment, then when college instruction is provided in a competitive market, the marginal social benefit of enrollment will exceed its marginal social cost in equilibrium.

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A positive externality means that there are social benefits to college enrollment that are not fully captured by the individual student enrolling. In a competitive market, each college will offer instruction until their marginal cost equals the price they can charge for their instruction. However, since the social benefits of enrollment are not reflected in the price, the marginal social benefit can exceed the price that students pay. This means that there is a net social benefit to enrollment, and society as a whole would be better off if more students enrolled in college.

If a Positive Externality Is Associated with College Enrollment, Then