Figure 1 shows the marginal private benefit from college education. The marginal cost of a college education
Question:
Figure 1 shows the marginal private benefit from college education. The marginal cost of a college education is a constant $6,000 a year. The marginal external benefit from a college education is a constant $4,000 per student per year.
1. What is the efficient number of students? If colleges are private (no government involvement), how many people enroll, what is the tuition, and what is the deadweight loss?
2. If the government provides public colleges, what is the tuition that will achieve the efficient number of students? How much must taxpayers pay?
3. If the government subsidizes private colleges, what subsidy will achieve the efficient number of college students?
4. If the government offers each student a voucher, what value of the voucher will achieve the efficient number of students?
Step by Step Answer:
1 In Figure 2 the efficient number of students is 50000 a year With no gov...View the full answer
