Refer to Figure 10-12. Suppose, on the figure, Q represents the quantity of education and P represents the price of education. Then the quantity
A) an inefficiency.
B) the extent of the negative externality that pertains to the market for education.
C) the amount of the tax that would be required to correct the negative externality that pertains to the market for education.
D) the amount of the subsidy that would be required to correct the positive externality that pertains to the market for education.

Question

Refer to Figure 10-12. Suppose, on the figure, Q represents the quantity of education and P represents the price of education. Then the quantity 
A) an inefficiency. 
B) the extent of the negative externality that pertains to the market for education. 
C) the amount of the tax that would be required to correct the negative externality that pertains to the market for education. 
D) the amount of the subsidy that would be required to correct the positive externality that pertains to the market for education.

Quizplus · Accepted Answer

The quantity represented by 11ea6dab_721d_c46f_9009_8795c737af7d_TB2186_11 is the quantity at which the marginal private cost (MPC) equals marginal social cost (MSC), but it is below the socially optimal quantity of education. This means that there is an inefficiency in the market for education, as the quantity consumed is less than what would be socially optimal. It does not represent a negative externality or a tax/subsidy required to correct an externality, but rather a market failure in which the market outcome is not efficient.