Education increases human capital and thus output. Give a possible reason why th

Question

Education increases human capital and thus output.

Give a possible reason why the government should subsidize education.

A. Human capital has less depreciation than physical capital, so human capital does not need to be replaced as often.

B. Some of education spending can be considered consumption expenditures.

C. Because education, at least higher levels, incurs an opportunity cost of lost wages, people may not be willing to invest in additional amounts of human capital.

D. Increased human capital will increase the steady-state growth rate.

Explanation / Answer

Answer.) C. Because education, at least higher levels, incurs an opportunity cost of lost wages, people may not be willing to invest in additional amounts of human capital.

There are external benefits associated with education. The students in college are not the only beneficiaries of education; research will yield benefits to the broader community.

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