College education tends to result in a positive externality because the recipient receives the full benefit of the education.

Question

Quizplus · Accepted Answer

A positive externality occurs when the production or consumption of a good or service results in a positive impact on a third party who is not directly involved in the transaction. In the case of college education, the positive externalities arise because the benefits of education spill over to the broader society. Individuals with education tend to earn higher wages, are more productive, and contribute more to the economy. Therefore, the benefits of education are not limited to the individual, but they also accrue to the society in the form of higher economic growth, improved public health, and reduced crime rates. Since the individual does not capture all the benefits of education, the externality is positive.

College Education Tends to Result in a Positive Externality Because