Some economists claim that early child care generates an external benefit to society. a. What is the market equilibrium? What is the socially optimal outcome? How do they differ? b. The government is planning to provide a per-unit subsidy for child care to achieve the socially optimal outcome. How large should this subsidy be? c. How much is the total government subsidy each month to reach a socially optimal outcome?

EBK HEALTH ECONOMICS AND POLICY
7th Edition
ISBN:9781337668279
Author:Henderson
Publisher:Henderson
Chapter6: Population Health
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Some economists claim that early child care generates an external benefit to society. a. What is the market equilibrium? What is the socially optimal outcome? How do they differ? b. The government is planning to provide a per-unit subsidy for child care to achieve the socially optimal outcome. How large should this subsidy be? c. How much is the total government subsidy each month to reach a socially optimal outcome?
Price
($ per month)
Supply
1,300
1,200
1,000|
900
Marginal Social Benefit
1.
Marginal Private Benefit
Quantity
(millions per month)
23
26
Transcribed Image Text:Price ($ per month) Supply 1,300 1,200 1,000| 900 Marginal Social Benefit 1. Marginal Private Benefit Quantity (millions per month) 23 26
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