-The marginal cost of educating a student is $30,000, and this cost is independent of the number of students. The figure above shows the marginal private benefit that a student receives from education. An independent government agency determines that the efficient number of students is 40,000. What subsidy per student must be given to universities to make the efficient number of students undertake education?
A) It depends on the demand.
B) $10,000
C) $30,000
D) $20,000

Question

-The marginal cost of educating a student is $30,000, and this cost is independent of the number of students. The figure above shows the marginal private benefit that a student receives from education. An independent government agency determines that the efficient number of students is 40,000. What subsidy per student must be given to universities to make the efficient number of students undertake education?
A) It depends on the demand. 
B) $10,000 
C) $30,000 
D) $20,000

Quizplus · Accepted Answer

The subsidy should equal the difference between the marginal private benefit and the marginal cost to achieve the efficient number of students. If the efficient number is 40,000, the subsidy needed is $20,000 per student to cover the gap between the private benefit and the cost.

-The Marginal Cost of Educating a Student Is $30,000, and This