Reference no: EM133266225

let ????(??) be the quantity of education demanded when the tuition is ??, and let ????(??) be the quantity of education supply when the tuition is ??. In the existing system, students apply to receive reimbursements ??, so they effectively pay ??-?? while universities receive ??. The alternative policy under consideration would see students pay ?? while universities receive ??+??.

Suppose that there are positive externalities associated with education. In this case, the private marginal benefit and social marginal benefit of education diverge. In your three figures, illustrate the deadweight loss associated with the externality. Be sure to discuss the marginal deadweight loss associated with the policies, e.g., whether the subsidies increase or decrease deadweight loss.