The figure shows the supply curve (S) and the demand curve (D) for college education. The external benefit from college education is $6,000 per student per year and is constant.
-In the figure above, if the government provides the efficient amount of education, what is the tuition?
A) $10,000 per year
B) $14,000 per year
C) $8,000 per year
D) $6,000 per year

Question

The figure shows the supply curve (S) and the demand curve (D) for college education. The external benefit from college education is $6,000 per student per year and is constant.
-In the figure above, if the government provides the efficient amount of education, what is the tuition?
A) $10,000 per year 
B) $14,000 per year 
C) $8,000 per year 
D) $6,000 per year

Quizplus · Accepted Answer

The efficient amount of education is where the marginal benefit of education equals the marginal cost of education. In this case, the marginal benefit of education is $14,000 per year, and the marginal cost of education is $8,000 per year. Therefore, the tuition should be $8,000 per year.

The Figure Shows the Supply Curve (S) and the Demand