Question

The consumption of education has positive externalities. If the government did not intervene in this market, what would be true?

A. Consumers would consume MORE education than the socially optimal amount.

B. Consumers would consume LESS education than the socially optimal amount.

C. Education would become more affordable.

D. Consumers would consume the socially optimal amount of education.

Answer 1

In a market without government intervention, consumers would likely consume less education than the socially optimal amount due to positive externalities.

Step-by-step explanation:

In a market without government intervention, consumers would likely consume LESS education than the socially optimal amount.

This is because the consumption of education has positive externalities, meaning that the benefits extend beyond the individual consumer to the broader society. When left to the private market alone, consumers may not take into account these positive externalities and only consider their own individual benefits. As a result, they may not consume as much education as would be socially optimal.