Final answer:
When education produces positive externalities and there is no government intervention, the market will underprovide education, resulting in a lower equilibrium quantity than the optimal level. Therefore, the equilibrium price will be lower than the optimal price. The correct option is d. the equilibrium price to be lower than the optimal price.
Step-by-step explanation:
If education produces positive externalities and the government does not intervene in the market, the market equilibrium will be inefficient.
This is because the social benefits of education, such as increased productivity and lower crime rates, are not reflected in the private market decisions. Thus, the private market will provide less education than is socially optimal.
Referring to the given information, we can see that when the government does not intervene in the market for wheat, equilibrium is achieved where quantity supplied equals quantity demanded.
However, for goods with positive externalities like education, this equilibrium does not account for the external benefits to society.
Therefore, in the absence of government intervention to address these externalities, it is expected that the equilibrium quantity will be lower than the optimal level. This is because the marginal private benefit (MPB) does not include the marginal social benefit (MSB), leading to underproduction of the good.
Consequently, the correct answer is that the equilibrium price is lower than the optimal price because if the social benefits were included, the demand for education would be higher at any given price, pushing the optimal price above the market equilibrium price. The correct option is d. the equilibrium price to be lower than the optimal price.