ECONOMICS
MARKET FAILURES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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the equilibrium quantity of education will be equal the socially optimal quantity of education.
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the equilibrium quantity of education will be greater than the socially optimal quantity of education.
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the equilibrium quantity of education will be less than the socially optimal quantity of education.
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There is not enough information to answer the question.
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Detailed explanation-1: -Answer and Explanation: If education produces positive externalities and the government does not intervene in the market, we would expect a. the equilibrium quantity to be lower than the optimal level. This is the best answer because the optimal level includes benefits to society that are not included in the price.
Detailed explanation-2: -While not always easy to measure, according to Walter McMahon, the positive externalities to education typically include better health outcomes for the population, lower levels of crime, a cleaner environment and a more stable, democratic government.
Detailed explanation-3: -If a positive externality exists in the provision of education when education is provided in a perfectly competitive market without government intervention, then at the market equilibrium level of education: additional net gains to society are possible by raising the level of education.
Detailed explanation-4: -When you consume education you get a private benefit. But there are also benefits to the rest of society. E.g you are able to educate other people and therefore they benefit as a result of your education. (positive consumption externality)