-The above figure shows the marginal private benefit and marginal social cost of a college education. If society's external benefits from college graduates is $10,000 each, then the private market outcome is inefficient because
A) no students will go to college.
B) society places less value on educating the next student than it will cost society to educate that student.
C) society places greater value on educating the next student than it will cost society to educate that student.
D) the marginal cost will shift upward.

Question

-The above figure shows the marginal private benefit and marginal social cost of a college education. If society's external benefits from college graduates is $10,000 each, then the private market outcome is inefficient because
A) no students will go to college. 
B) society places less value on educating the next student than it will cost society to educate that student. 
C) society places greater value on educating the next student than it will cost society to educate that student. 
D) the marginal cost will shift upward.

Quizplus · Accepted Answer

The private market outcome is inefficient because the marginal social benefit, which includes the external benefits, is greater than the marginal private benefit. This means society values the education more than the private market does, leading to underinvestment in education.

-The Above Figure Shows the Marginal Private Benefit and Marginal