Question

If education creates external benefits, a. actual market outcomes provide less than the efficient quantity of education. b. actual market outcomes provide more than the efficient quantity of education. c. actual market outcomes provide a higher price than the efficient price of education. d. the government should impose a depletion tax.

Answer 1

Answer:

The correct answer is c. actual market outcomes provide a higher price than the efficient price of education.

Explanation:

In any country, there is a close positive correlation between a greater number of years of study and income, just as a higher degree of education is related to a lower incidence of poverty. In general, knowledge provides a great deal of benefits to its holders, so why might a government policy for investment in human capital be necessary? The answer could be that knowledge generates a series of “external benefits”, which are not always considered by people when making their decisions.

Economic activities generate costs and benefits, which can be private or external. In this way, whoever studies obtains a benefit for himself, for example a better salary, as explained above. That is the private benefit. But a series of external benefits are also generated, for example, the possibility of being better citizens, of improving the communication and performance of people in society, of generating new solutions to different human problems, among many others. Likewise, research and development activities lead to obtaining new knowledge. All these benefits are obtained thanks to preschool, primary, secondary, technical, university education, job training, among others.