-The table above provides information about the marginal private benefit for education. The marginal private cost, which also equals the marginal social cost, of educating a student is $16,000 per year and does not change as more students are educated. There is an external benefit from education that is equal to $12,000 per student year and does not change as more students are educated. If the government subsidises education, how much should the subsidy be in order to attain the efficient level of enrollment?
A) $4,000
B) $16,000
C) $8,000
D) $12,000

Question

-The table above provides information about the marginal private benefit for education. The marginal private cost, which also equals the marginal social cost, of educating a student is $16,000 per year and does not change as more students are educated. There is an external benefit from education that is equal to $12,000 per student year and does not change as more students are educated. If the government subsidises education, how much should the subsidy be in order to attain the efficient level of enrollment?
A) $4,000 
B) $16,000 
C) $8,000 
D) $12,000

Quizplus · Accepted Answer

The subsidy should equal the external benefit to internalize the externality, which is $12,000 per student year.

-The Table Above Provides Information About the Marginal Private Benefit