Suppose That Elementary Education Creates a Positive Externality

question 99

Multiple Choice

Suppose that elementary education creates a positive externality. If the government subsidizes education by an amount equal to the per-unit externality it creates, then

• A)the equilibrium quantity of education will equal the socially optimal quantity of education.
• B)the equilibrium quantity of education will be greater than the socially optimal quantity of education.
• C)the equilibrium quantity of education will be less than the socially optimal quantity of education.
• D)There is not enough information to answer the question.

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Definitions:

Cochlea

A spiral-shaped, fluid-filled inner ear structure that plays a key role in the process of hearing by converting sound waves into nerve impulses.

Retina

The light-sensitive layer of tissue at the back of the inner eye that converts light images into neural signals sent to the brain.

Optic Disk

Area of the retina where the optic nerve exits the retina; lacks photoreceptors and so causes a blind spot.

Optic Pit

A small depression in the optic disc where nerve fibers exit the eye, contributing to the blind spot.