Some economists argue that early child care generates an external benefit to society. Consider the following demand and supply graph for early childhood education.

a. How does the market equilibrium differ from what is best for society? 

b. If the government was going to provide a per-unit subsidy in this market in order to achieve the socially optimal outcome, how large of a subsidy would the government need to provide? 

c. How much in total would the government need to spend in this market each month to achieve a socially optimal outcome?

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Price ($ per month) $1,300 $1,200 $1,000 $900 Supply 23 26 Marginal social benefit Marginal private benefit (demand) Quantity (millions per month) Stevenson/Wolfers, Principles of Economics, 1e, 2020 Worth Publishers