What type of externality arises from studying

Reference no: EM131021387

Tom and Jacob are college students. Each of them will probably get married later and have two or three children. Each knows that if he studies more in college, he'll get a better job and earn more money. Earning more will enable them to spend more on their future families for things such as orthodontia, nice clothes, admission to expensive colleges, and travel. Tom thinks about the potential benefits to his potential children when he decides how much studying to do. Jacob doesn't.

a. What type of externality arises from studying?

b. Draw a graph showing this externality, contrasting the responses of Tom and Jacob. Who studies more? Who acts more efficiently? Briefly explain.

Reference no: EM131021387

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