Question

uppose that an MBA degree creates no extemality because the benefits of an MBA are internalized by the student in the form of higher wages. If there are no government subsidies for MBAs, then which of the following statements is correct? a. The equilibrium quantity of MBAs will equal the socially optimal quantity of MBAs. b. The equilibrium quantity of MBAs will be greater than the socially optimal quantity of MBAS. c. The equilibrium quantity of MBAs will be less than the socially optimal quantity of MBAs. d. There is not enough information to answer the question.

Answer 1

A) The equilibrium quantity of MBAs will equal the socially optimal quantity of MBAs.

Step-by-step explanation:

No government subsidies, no government taxes, no government anything = free markets = capitalism = fantasy world

Pure capitalism doesn't exist (only semi capitalistic economies), since governments exist and they regulate the economy, tax and transfer money, and spend.

But in a fantasy world where governments do not exist, then the equilibrium quantity of any good or service equals the socially optimal quantity. That applies to every single product or service.