-The marginal cost of educating a student is $30,000, and this cost is independent of the number of students. The figure above shows the marginal private benefit that a student receives from education. An independent government agency determines that the efficient number of students is 40,000. What subsidy per student must be given to colleges to make the efficient number of students undertake education?
A) It depends on the demand.
B) $20,000
C) $30,000
D) $10,000

Question

-The marginal cost of educating a student is $30,000, and this cost is independent of the number of students. The figure above shows the marginal private benefit that a student receives from education. An independent government agency determines that the efficient number of students is 40,000. What subsidy per student must be given to colleges to make the efficient number of students undertake education?
A) It depends on the demand. 
B) $20,000 
C) $30,000 
D) $10,000

Quizplus · Accepted Answer

The efficient number of students is 40,000, and the marginal cost of educating a student is $30,000. The marginal private benefit that a student receives from education is less than the marginal cost, so the government must subsidize education to make the efficient number of students undertake education. The subsidy per student must be equal to the difference between the marginal cost and the marginal private benefit, which is $20,000.

-The Marginal Cost of Educating a Student Is $30,000, and This