Education provides a positive externality

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It is believed that education provides a positive externality (i.e. an external benefit) to society that would not be exhibited in a free market for education. Given this: A) briefly describe what would be the free market price and quantity outcome for education as compared to the socially optimal P, Q. B) Kentucky subsidizes higher education through payments to the state universities. Show on a graph of Supply and Demand for education the effect of this subsidy as compared to the free market case and describe the impact on equilibrium P & Q of education. C) Kentucky also provides funds to high achieving high school students to attend college. On a second S&D graph, show and describe the impact of this as compared to the free market equilibrium.

Reference no: EM13774449

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