If education creates positive externalities, then:
A)private markets provide less than the socially optimal quantity of education.
B)private markets provide more than the socially optimal quantity of education.
C)the marginal private benefit curve is higher than the marginal social benefit curve.
D)the marginal private cost curve is higher than the marginal social cost curve.
E)the government should impose a depletion tax.

Question

If education creates positive externalities, then:​
A)private markets provide less than the socially optimal quantity of education.
B)private markets provide more than the socially optimal quantity of education.
C)the marginal private benefit curve is higher than the marginal social benefit curve.
D)the marginal private cost curve is higher than the marginal social cost curve.
E)the government should impose a depletion tax.

Quizplus · Accepted Answer

Positive externalities occur when the benefits of an activity spill over to others in the society who do not directly participate in that activity. In the case of education, an individual who receives education not only improves their own productivity but also contributes to the productivity of the society as a whole by creating a more educated workforce, spurring innovation, improving health outcomes, and reducing crime rates. Since private markets fail to take into account these benefits to others, they will provide less education than the socially optimal level. Therefore, government intervention is necessary to correct this market failure and ensure that the societal benefits of education are realized.

If Education Creates Positive Externalities, Then:​

If Education Creates Positive Externalities, Then: