Question

Imagine that we live in a country with free public education that is "take it or leave it" (i.e. families can either send their kids to public schools, or they can spend their own money to send them to private schools, but they can not add extra educational spending on top of the public schools). Now, assume the government implements a universal voucher program for education (i.e. families are given a fixed dollar amount per child that they can only spend on education for their children - they can spend up to the voucher amount or they can spend the voucher amount and add extra educational spending on top of the voucher). What does theory suggest will happen to total spending on education?

A. Introducing a universal voucher program will absolutely INCREASE total spending on education.

B. Introducing a universal voucher program will absolutely DECREASE total spending on education.

C. Introducing a universal voucher program will increase spending on education for children in some families, but also decrease spending on education for some children in other families. Thus, theory does not predict whether total spending will increase or decrease.

D. There is no theory that can analyze this situation.

Explain why

Answer 1

Answer : The answer is option A.

Families who send their children in private school by spending their own money now those families spends a fixed dollar amount which is necessary plus they can add extra dollar amount for educational spending if they want. On the other side, families who spends nothing for their children's education by sending them in public school, now those families have to spend a fixed dollar amount due universal educational voucher program. Therefore, the total educational spending increase.

For example : Let there are 10 children in private school and 10 children in public school. Let before universal educational voucher program families spends $150 per child for private school's education where families spends nothing for public school's education. So, in this case the total educational spending = (10 * 150 + 10 * 0) = $1500. Now let the fixed necessary amount of universal educational voucher program is $100 and families can spend more on education if they want. So, based on fixed necessary amount total educational spending for private school is (10 * 100) = $1000. Similarly, total educational spending for public school is (10 * 100) = $1000 after implementing universal educational voucher program. Therefore, total educational spending after implementing universal educational voucher program is (1000 + 1000) = $2000 based on necessary fixed educational spending amount. So, here it is clear that the total educational spending increases due to universal educational voucher program.

Therefore, option A is the correct answer.