Question Briefly explain why education confers positive externality. Depict the market for education where social benefit...

Question Briefly explain why education confers positive externality. Depict the market for education where social benefit exceeds private benefit. Explicitly show the equilibrium and socially optimal quantities.

Solutions

Expert Solution

If one person gets education, the benefits of education has a spillover effect on her immediately family, neighborhood and the society by way of increased human capital, higher social awareness and environmental sustainability, for which the other beneficiaries don't need to pay. Therefore, education is a positive externality.

The positive externality gives rise to an external benefit in consumption, which shifts demand (private marginal benefit, PMB) rightward by amount of external benefit to social marginal benefit (SMB). In following graph, equilibrium is at point A where PMB intersects PMC with price P0 and quantity Q0. Efficient outcome is at point B where SMB intersects PMC with higher price P1 and higher quantity Q1. Deadweight loss from non-internalization of the externality is area of triangle ABC. Government can ensure social efficiency by offering consumption subsidy of BD per unit.

Rahul Sunny answered 1 month ago

Next > < Previous

Related Solutions

Briefly explain why education confers positive externality. Depict the market for education where social benefit exceeds...

Briefly explain why education confers positive externality. Depict the market for education where social benefit exceeds private benefit. Explicitly show the equilibrium and socially optimal quantities.

What is the Social Marginal Benefit (MSB) of a positive externality such as an adult literacy...

What is the Social Marginal Benefit (MSB) of a positive externality such as an adult literacy program sponsored by a transnational corporation? How would the government intervene in such a case to alter the allocation of resources? Use suitable examples of your choice. (10)

If there is a positive externality, use a diagram to explain why there may be no...

If there is a positive externality, use a diagram to explain why there may be no efficiency loss due to the insurance price subsidy.

Define an externality ??Cite both a positive and negative externality. Explain why, in each case, the...

Define an externality ??Cite both a positive and negative externality. Explain why, in each case, the market would provide either less than or greater than the efficient quantity. How would you propose correcting for each of the externalities mentioned??

Question 1 A. Define an externality. B. Distinguish a negative externality from a positive externality, and...

Question 1 A. Define an externality. B. Distinguish a negative externality from a positive externality, and give one example of each. C. What is meant by a production externality as opposed to a consumption externality? D. Give one example of a negative production externality and one of a positive consumption externality.

think of a positive or negative externality that youve witnessed. explain why it is that kind...

think of a positive or negative externality that youve witnessed. explain why it is that kind of externality. was anything done to adjust for this externality? What should be done?

substantial subsidies to college education, assuming that there is a positive externality to acquiring a quiring...

substantial subsidies to college education, assuming that there is a positive externality to acquiring a quiring a collage degree large taxes or penalties for farmers who overuse pesticides and fertilize, causing excessive runoff into public waterways negative externality 3- tariffs on imported goods. what is the efficiency argument for or against of these three questions ? in brief

A positive externality will not generate a deadweight loss because it generates an external benefit to...

A positive externality will not generate a deadweight loss because it generates an external benefit to bystanders in society. True or False with explanation.

Give an example of a negative externality and possible externality. Explain why market outcomes are inefficient...

Give an example of a negative externality and possible externality. Explain why market outcomes are inefficient in the presence of externalities.

Question 1 Define an externality. Distinguish a negative externality from a positive externality, and give one...

Question 1 Define an externality. Distinguish a negative externality from a positive externality, and give one example of each. What is meant by a production externality as opposed to a consumption externality? Give one example of a negative production externality and one of a positive consumption externality.

Subjects