Use the figure below to answer the following questions.

Figure 16.3.3
-Refer to Figure 16.3.3. The figure shows the marginal private benefit and marginal social cost of a university education. If society's external benefit from university graduates is $10,000 each, then
A)a subsidy of $10,000 per student paid to the universities achieves efficiency.
B)a tax of $10,000 per student imposed on the universities achieves efficiency.
C)10 million students per year is the efficient number students.
D)a subsidy of $20,000 per student paid to the universities achieves efficiency.
E)a tax of $5,000 per student paid by taxpayers achieves efficiency.

Question

Use the figure below to answer the following questions.
  
Figure 16.3.3
-Refer to Figure 16.3.3. The figure shows the marginal private benefit and marginal social cost of a university education. If society's external benefit from university graduates is $10,000 each, then
A)a subsidy of $10,000 per student paid to the universities achieves efficiency. 
B)a tax of $10,000 per student imposed on the universities achieves efficiency. 
C)10 million students per year is the efficient number students. 
D)a subsidy of $20,000 per student paid to the universities achieves efficiency. 
E)a tax of $5,000 per student paid by taxpayers achieves efficiency.

Quizplus · Accepted Answer

A subsidy of $10,000 per student aligns the marginal private benefit with the marginal social benefit, achieving efficiency by internalizing the external benefit.

Use the Figure Below to Answer the Following Questions