Use the following graph to answer the next three questions. The graph presents t

Question

Use the following graph to answer the next three questions. The graph presents the private and social marginal benefits to education and the marginal costs of education 100,000 90.000 E 80,000 70,000 60,000 Marginal Costs Marginal Social Benefits Marginal 50,0001 Private Benefits 40,000 30,000 20,000 10.000 0 1 2 3 4567 8 9 1011121314 15161718 1920 Years of Education Question 39: If one does not consider externalities, the optimal number of years of education for an individual would be C 1) 0 C 2) 9 C 3) 1 C 4) 13 Question 40: The optimal number of years of education for an individual from a societal perspective would be C 1) 0 C 3) 10 C 4) 1 Question 48: In order to have an impact on the relevant market, a price floor must be set C at equilibriunm 2) within 10% of equilibrium (either above or below) O 3) above equilibrium C 4) below equilibrium

Explanation / Answer

39) if one does not consider externalities,then the optimal number of year of education would be that year at which private marginal benefit = marginal cost. So 10 is the answer. The correct option is 3. 40) the optimal number of years of education for individual from social prospective view would be that year at which marginal social benefit = marginal cost. So 13 is the answer. The correct option is 4. 41) price floor is a legal minimum price. So in order to have impact on the relievent market, price floor must be set above equilibirium. So the correct option is 3

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