Example of activity that generates positive externalities

Assignment Help Business Economics

Reference no: EM131194391

Primary School education is often used as an example of an activity that generates positive externalities. Let's assume that in a particular country, all primary education is provided by the private sector and private demand is perfectly elastic at a price of $1000 per student. Further, assume that the marginal external benefit is constant at $100 per student. Use the additional information below to answer the following questions:

Number of students...marginal private cost 1...$100 2...$220 3...$370 4...$560 5...$780 6...$1080 7...$1500 8...$1990 9...$2600 10...$3420

a) Devise a Gov't subsidy that will induce private education providers to educate the socially optimal number of students. Provide a dollar amount for the subsidy and explain.

b) Does it ever make sense to not educate some students? If the example was couched in terms of college education, would it ever make sense not to educate some students? Explain and distinguish between primary and secondary education versus post-secondary education.

Reference no: EM131194391

Questions Cloud

What is the equivalent single-sum amount at the present time : A father wants to save for his eight-year-old son's college expenses. The son will enter college 10 years from now. An annual amount of $30,000 in constant dollars will be required to support the son's college expenses for four years. What is the equ..

The end of the first six months after his retirement : A man is planning to retire in 20 years. He can deposit money for his retirement at 12% interest rate compounded monthly. It is estimated that the future general inflation (f) rate will be 4% compounded annually. Assume that his first withdrawal occu..

According to BLS-Why did the prices of other items change : According to the BLS, the CPI rose 3.8% in August of this year compared to a year earlier. Food prices rose 4.6% and clothing prices were up 4.2%, while new car prices rose 3.8%, and medical care was up 3.2%. What percentage change in the CPI up unti..

Example of activity that generates positive externalities : Primary School education is often used as an example of an activity that generates positive externalities. Let's assume that in a particular country, all primary education is provided by the private sector and private demand is perfectly elastic at a..

Checkable deposits into interest bearing MMDAs : In recent years Sweep Programs have grown throughout the U.S. With this financial innovation, banks automatically sweep excess funds from their customers’ checkable deposits into interest bearing MMDAs, which are part of savings and time deposits. Us..

Define the discount window and federal reserves policy tool : The Federal Reserve Discount Window was fundamental to the founding of the Fed in 1913. And while the basic structure has stayed the same, in at least one way its importance has been diminished and in at least one way its importance remains significa..

The nightmares of disintermediation and interest rate risk : Over the past 35 years, the banking system in the U.S. has undergone remarkable cycles of prosperity then adversity, culminating in the financial crisis of 2008-09. In the aftermath of this crisis, banks still face their three fundamental challenges ..

Decided to hold the money supply constant : During 2003, we began to stop worrying that inflation was a problem. Instead, we began to worry about deflation, a decline in the price level. Assume that the Fed decided to hold the money supply constant. What impact would deflation have on interest..

User Account

All Pages