-In the above figure, what amount of subsidy per student would government have to provide to universities if its desired objective was to achieve an efficient level of education, 50 million students per year?
A) $18,000 per year
B) $27,000 per year
C) $12,000 per year
D) $6,000 per year

Question

-In the above figure, what amount of subsidy per student would government have to provide to universities if its desired objective was to achieve an efficient level of education, 50 million students per year?
A) $18,000 per year 
B) $27,000 per year 
C) $12,000 per year 
D) $6,000 per year

Quizplus · Accepted Answer

The efficient level of education is achieved at the point where the marginal benefit of education equals the marginal cost of education. At this point, the subsidy per student would be equal to the difference between the marginal cost of education and the marginal benefit of education. In this case, the marginal cost of education is $18,000 per year and the marginal benefit of education is $27,000 per year. Therefore, the subsidy per student would be $27,000 - $18,000 = $9,000 per year.

-In the Above Figure, What Amount of Subsidy Per Student