Marginal benefit (dollars per student por year 5,000 3,000 2,000 1,500 1,200 1,0

Question

Marginal benefit (dollars per student por year 5,000 3,000 2,000 1,500 1,200 1,000 Students millions poryear) The table shows the marginal benefit schedule from a college education. The marginal cost of educating a college student is $5000 a year. The marginal external benefit from a college education is a constant $2,000 per student per year There are no public colleges If the government offers vouchers to students, what is the value of the voucher that will encourage the efficient number of students to enroll? The value of the voucher is per student andmillion students enroll

Explanation / Answer

The value of the voucher should equal to the external benefit, so it should have a value of $2000 per student.

Number of students who enrol will be 2 million so that the social marginal benefit equals marginal cost.

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