Respuesta :
Answer:
D. Government to subsidize education
Explanation:
Externalities reflect benefit / harm to third party , without being reflected in price . These can be positive (beneficial) / negative (harmful) , egs - wildlife sancturies and pollution respectively .
Positive Externalities : Total Benefit to society > Private benefit to the person consuming [Total Benefit = Private Benefit + Social Benefit]. Negative Externalities : Total Cost to Society > Private Cost beared by person consuming [Total Cost = Private Cost + Social Cost]
Positive externalities' extra social benefit & negative externalities' extra social cost are not reflected in their price. So, govt increases tax on negative externalities (to accomodate extra social cost) & subsidises positive externalities (to accomodate extra social benefit) .This makes correction of underproduction of positive externalities & over production of negative externalities (based on private Benefit = Cost equalisation) .
Education is a positive externality because it doesn't only create benefit (private) for the person consuming , but also creates extra social awareness benefits . Hence , as per the above explanation : education being a positive externality ,would be subsidized .
