Assuming education results in a positive externality, which of the following statements is correct?
A)The social cost of producing education exceeds the private cost of producing education.
B)The positive externality can be depicted on a graph by the vertical distance between the supply curve and the social-cost curve.
C)The socially optimal quantity of education will exceed the market equilibrium quantity of education.
D)All of the above are correct.

Question

Quizplus · Accepted Answer

If education results in a positive externality, the social benefit of education will exceed the private benefit. This means that the demand curve will shift rightward, indicating that at any given price, consumers will demand more education. Since the demand curve does not reflect the full social benefit, the market equilibrium quantity of education will be lower than the socially optimal quantity. Therefore, the socially optimal quantity of education will exceed the market equilibrium quantity of education. Option A is incorrect, as the social cost of producing education is not necessarily higher than the private cost. Option B is incorrect, as the vertical distance between the supply curve and the social-cost curve would represent the magnitude of the negative externality of education, not the positive externality.

Assuming Education Results in a Positive Externality, Which of the Following