-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 undertakes public provision of the efficient amount of education, how much will the government charge for tuition?
A) $4,000
B) $8,000
C) $12,000
D) $16,000

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 undertakes public provision of the efficient amount of education, how much will the government charge for tuition?
A) $4,000 
B) $8,000 
C) $12,000 
D) $16,000

Quizplus · Accepted Answer

The efficient amount of education occurs where the marginal social benefit (MSB) equals the marginal social cost (MSC). The MSB is the sum of the marginal private benefit (MPB) and the external benefit. Since the external benefit is $12,000, the government should charge tuition equal to the marginal private cost minus the external benefit, which is $16,000 - $12,000 = $4,000.

-The Table Above Provides Information About the Marginal Private Benefit