solution

 

Suppose the following data represent the market demand for college education:

 

Tuition (per year)

$1,000

 2,000

 3,000

 4,000

5,000

 6,000

 7,000

 8,000

Enrollment demanded

(in millions per year)

 

 

 

 

 

 

 

 

 

 

 8

 7

 6

 5

4

 3

 2

 1

(a) If tuition is set at $4,000, how many students will enroll?

Now suppose that society gets an external benefit of $1,000 for every enrolled student.

(b) Draw the social and market demand curves for this situation on the graph below (left).

(c) What is the socially optimal level of enrollments at the same tuition price of $4,000?

(d) How large of a subsidy is needed to achieve this optimal outcome

 

Suppose the following data represent the market demand for college education: Tuition (per year)...

 

 
"Looking for a Similar Assignment? Get Expert Help at an Amazing Discount!"
Looking for a Similar Assignment? Our Experts can help. Use the coupon code SAVE30 to get your first order at 30% off!

Hi there! Click one of our representatives below and we will get back to you as soon as possible.

Chat with us on WhatsApp