The figure above shows the demand for college education (D), the marginal social benefit of college education (MSB), and the marginal cost of the private schools (MC).
-Using the figure above,suppose a subsidy of $15,000 per student is provided to private colleges.When the market is in equilibrium,marginal social benefit ________ marginal cost,and the number of students enrolled is ________.
A) exceeds; above the efficient quantity
B) exceeds; below the efficient quantity
C) is below; above the efficient quantity
D) is below; below the efficient quantity
E) equals; efficient

Question

The figure above shows the demand for college education (D), the marginal social benefit of college education (MSB), and the marginal cost of the private schools (MC).
-Using the figure above,suppose a subsidy of $15,000 per student is provided to private colleges.When the market is in equilibrium,marginal social benefit ________ marginal cost,and the number of students enrolled is ________.
A) exceeds; above the efficient quantity 
B) exceeds; below the efficient quantity 
C) is below; above the efficient quantity 
D) is below; below the efficient quantity 
E) equals; efficient

Quizplus · Accepted Answer

When a subsidy is provided, it lowers the cost of attending private colleges, which can lead to an increase in enrollment. In equilibrium, the marginal social benefit of education equals the marginal social cost, indicating an efficient allocation of resources. Thus, with the subsidy, the market can reach an efficient equilibrium where the number of students enrolled matches the socially optimal level.

The Figure Above Shows the Demand for College Education (D)