-The Table Above Provides Information About the Marginal Private Benefit

question 130

Multiple Choice

-The table above provides information about the marginal private benefit of education. The marginal private cost, which also equals the marginal social cost, of educating a student is $16,000 per year and does not change as more students are educated. There is an external benefit from education that is equal to $12,000 per student- year and does not change as more students are educated. If the market for education is competitive and unregulated, the equilibrium quantity of education will be _______ and the tuition will be _______.

• A) 20,000 student- years; $20,000
• B) 60,000 student- years; $12,000
• C) 80,000 student- years; $8,000
• D) 40,000 student- years; $16,000

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Definitions:

Payback Period

Payback period is the amount of time it takes for an investment to generate an amount of cash flow equal to the original investment amount.

Net Cash Inflows

The amount of cash that a business receives over a period, minus the amount of cash outflows.

Inventory Cost

Inventory cost includes the costs associated with purchasing, storing, and managing goods that a business intends to sell; it typically comprises the purchase price, warehousing costs, and any other expenses related to holding inventory.

NPV Rule

The principle that an investment is considered acceptable if its net present value (NPV) is positive, under the context of discounted cash flow analysis.