The privately owned school system in Smalltown has a virtually unlimited capacity.It accepts all applicants and operates on both tuition and private donations.Although every resident places value on having an educated community,the school's revenues have suffered lately due to a large decline in private donations from the elderly population.If the private market quantity of education is below the socially desirable quantity,how can Smalltown remedy its problem
A)by having the local government tax local citizens in order to subsidize education
B)by increasing tuition to compensate for the decrease in donations
C)by increasing teacher wages
D)by lowering enrolment

Question

Quizplus · Accepted Answer

Since the private market quantity of education is below the socially desirable quantity, the best way to remedy the problem is for the local government to step in and provide subsidies for education. This will allow for the school to continue accepting all applicants and operating on both tuition and private donations while still maintaining an affordable option for all members of the community. Increasing tuition or teacher wages or lowering enrollment will not address the root problem of decreased private donations from the elderly population.

The Privately Owned School System in Smalltown Has a Virtually