41) The table above provides information about the marginal private benefit for education. The marginal private cost, which also equals the marginal social cost, of educating a student is $16,000 per year and does not change as more students are educated. There is an external benefit from education that is equal to $12,000 per student year and does not change as more students are educated. If the government subsidizes education, how much should the subsidy be in order to attain the efficient level of enrollment?
A) $4,000
B) $8,000
C) $12,000
D) $16,000
42) The table above provides information about the marginal private benefit for education. The marginal private cost, which also equals the marginal social cost, of educating a student is $16,000 per year and does not change as more students are educated. There is an external benefit from education that is equal to $12,000 per student year and does not change as more students are educated. If the government undertakes public provision of the efficient amount of education, how much will the government charge for tuition?
A) $4,000
B) $8,000
C) $12,000
D) $16,000
Quantity (millions of students per year)Marginal private benefit (thousands of dollars per student per year) Marginal social benefit (thousands of dollars per student per year) Marginal private cost and marginal social cost (thousands of dollars per student per year)
420288
8182510
12162212
16141914
20121616
24101318
43) The table above shows the marginal costs and marginal benefits of college education. If the market for college education is perfectly competitive and unregulated, how many students are enrolled in college?
A) 12 million
B) 20 million
C) 16 million
D) 24 million
44) The table above shows the marginal costs and marginal benefits of college education. If the market for college education is perfectly competitive and unregulated, what is the price of college education?
A) $8,000 per year
B) $12,000 per year
C) $14,000 per year
D) $16,000 per year
45) The table above shows the marginal costs and marginal benefits of college education. If 8 million students are enrolled, the marginal external benefit is
A) zero.
B) $4,000.
C) $5,000.
D) $7,000.
46) The table above shows the marginal costs and marginal benefits of college education. If 20 million students are enrolled, the marginal external benefit is
A) zero.
B) $4,000.
C) $5,000.
D) $7,000.
47) The table above shows the marginal costs and marginal benefits of college education. If the market for college education is perfectly competitive and unregulated, at the equilibrium quantity, the marginal external benefit is
A) zero.
B) $5,000.
C) $4,000.
D) $8,000.
48) The table above shows the marginal costs and marginal benefits of college education. If the market for college education is perfectly competitive and unregulated, at the equilibrium quantity, the marginal social benefit is
A) zero.
B) $14,000.
C) $19,000.
D) $16,000.
49) The table above shows the marginal costs and marginal benefits of college education. If the market for college education is perfectly competitive and unregulated, at the equilibrium quantity, the marginal private benefit is
A) zero.
B) $14,000.
C) $19,000.
D) $16,000.
50) The table above shows the marginal costs and marginal benefits of college education. If the market for college education is perfectly competitive and unregulated, at the equilibrium quantity, the marginal private cost is
A) zero.
B) $14,000.
C) $19,000.
D) $16,000.
The Correct Answer and Explanation is :
Let’s go through the questions step by step.
Question 41:
What should the subsidy be to attain the efficient level of enrollment?
The subsidy needed to attain the efficient level of enrollment should cover the external benefit. In this case, the external benefit is $12,000 per student per year. To achieve the efficient quantity of education, the government needs to ensure that the private benefit to individuals is equal to the social benefit (which includes both private and external benefits). The marginal private benefit (MPB) needs to be adjusted upwards by the external benefit to match the marginal social benefit (MSB). Since the external benefit is $12,000, the subsidy should be $12,000 per student.
Answer: C) $12,000
Question 42:
How much will the government charge for tuition under public provision of the efficient amount of education?
If the government undertakes public provision of education at the efficient level, the government will charge tuition equal to the marginal social cost (MSC), which is the cost of educating an additional student including both private and external benefits. The marginal social cost (MSC) is equal to the marginal private cost (MPC) in this case, which is $16,000 per student. Therefore, the tuition charged by the government will be $16,000.
Answer: D) $16,000
Question 43:
How many students will be enrolled in a perfectly competitive, unregulated market?
In a perfectly competitive market, education will be provided where the marginal private benefit (MPB) equals the marginal private cost (MPC). From the table, we look for the point where MPB = MPC:
- At 16 million students, MPB = MPC = $16,000. Thus, in the unregulated market, 16 million students will be enrolled.
Answer: C) 16 million
Question 44:
What is the price of college education in a perfectly competitive, unregulated market?
In a perfectly competitive market, the price is determined by the marginal private cost (MPC), which is $16,000. Therefore, the price of college education will be $16,000 per year.
Answer: D) $16,000
Question 45:
What is the marginal external benefit when 8 million students are enrolled?
At 8 million students, the marginal external benefit is $4,000, as per the table.
Answer: B) $4,000
Question 46:
What is the marginal external benefit when 20 million students are enrolled?
At 20 million students, the marginal external benefit is $5,000.
Answer: C) $5,000
Question 47:
What is the marginal external benefit at the equilibrium quantity in a perfectly competitive, unregulated market?
In a perfectly competitive, unregulated market, the equilibrium is reached when MPB = MPC. At the equilibrium quantity (16 million students), the marginal external benefit is $0, because the market does not take into account external benefits.
Answer: A) zero
Question 48:
What is the marginal social benefit at the equilibrium quantity in a perfectly competitive, unregulated market?
At equilibrium, the marginal social benefit (MSB) is the sum of the marginal private benefit (MPB) and the marginal external benefit. Since the marginal external benefit is $0 at equilibrium in a perfectly competitive market, the marginal social benefit is equal to the marginal private benefit. At 16 million students, MPB is $16,000, so the MSB is $16,000.
Answer: D) $16,000
Question 49:
What is the marginal private benefit at the equilibrium quantity in a perfectly competitive, unregulated market?
At the equilibrium quantity (16 million students), the marginal private benefit (MPB) is $16,000.
Answer: D) $16,000
Question 50:
What is the marginal private cost at the equilibrium quantity in a perfectly competitive, unregulated market?
At the equilibrium quantity, the marginal private cost (MPC) is equal to $16,000, as it is given in the table.
Answer: D) $16,000
Explanation: These questions focus on the concept of marginal benefits and costs in the context of externalities. In a perfectly competitive, unregulated market, the marginal private benefit (MPB) equals the marginal private cost (MPC), and the market does not take into account external benefits. If the government wants to correct for the external benefits, they can provide a subsidy equal to the external benefit (in this case, $12,000 per student). Under public provision, the government charges the marginal social cost, which is equal to the marginal private cost (MPC) of $16,000.