MB (private)--\'-MB (social)-*-MC (social Quantity (years of education) Question

Question

MB (private)--'-MB (social)-*-MC (social Quantity (years of education) Question 1: The graph above shows the market for education, where MC (social) represents the social supply curve and reflects the full social marginal costs of education. MB (private) is the private demand curve and represents the private marginal benefits of education. MB (social) is the social demand curve and represents the social marginal benefits of education. Given the situation depicted in the graph C 1) Without intervention, the market will generate 13 years of education 2) Without intervention, the market will generate 12 years of education 3) Without intervention, the market won't generate any education 4) Without intervention, consumer surplus from education will be negative C C C Question 2: The existence of positive externalities C 1) cause the production of products to exceed their socially optimal levels 2) indicates that property rights have been appropriately determined. C 3) cause the production of products to be less than their socially optimal levels C 4) means that the marginal social costs curve is positioned lower and to the right of the marginal private costs curve. Question 3: It is common for education to be at least partially publically-funded in many developed countries because C 1 private schools at the K-12 level have never been successful. C 2) it is well-recognized that there are large negative externalities associated with education. C 3) the private sector would be unable to determine appropriate classroom content without the direction of government agencies. the existence of positive externalities associated with education causes the private production of education to be less than socially-optimal levels C 4)

Explanation / Answer

1. Without intervention, no. of years of education will be determined at the point where MB (private) = MC

Here, it happens at 12 years of education

Option 2

2. Because of positive externality, production is less than socially optimum

option 3

3. Education is partially funded by govt. because the existence of positive externality causes private production to be less than socially optimum

Option 4

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