Some economists argue that early child care generates an external benefit to society. Consider the following demand and supply graph for early childhood education. a. Place point A at the market equilibrium outcome. Place point B at the socially efficient outcome. U.S. childcare market Price ($ per month) 1,500 1,400 1,300 1,200 1,100 1,000 900 800 700 600 500 400 300 200 100 0 Supply Marginal social benefit Marginal private benefit A B 0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 Quantity (million per month) b. The market equilibrium price is the price that is best for society, and the market equilibrium quantity is the quantity that is best for society. c. The government should provide a per unit subsidy of to achieve the socially optimal outcome. This subsidy would cost the government million in total each month.
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Without a specific graph to reference, it's hard to give exact coordinates for points A and B. However, in general, point A (the market equilibrium outcome) would be where the supply and demand curves intersect. This is the point where the quantity supplied equals Show more…
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