Question

the return to schooling for society is higher than the return to schooling for the individual if a. the concept of diminishing returns applies to education. b. the concept of constant returns to scale applies to education. c. human capital conveys positive externalities. d. investment in human capital involves no opportunity costs.

Answer 1

Answer:

The correct answer is c. human capital conveys positive externalities.

Explanation:

Externalities are defined as consumption, production and investment decisions made by individuals, households and companies and that affect third parties that do not participate directly in those transactions. Sometimes those indirect effects are tiny. But when they grow up, they can be problematic; That is what economists call "externalities." Externalities are one of the main reasons that lead governments to intervene in the economy.

Positive externalities: In this case, it is about the difference between private and social benefits. For example, research and development activities are widely considered as generating positive effects that transcend the producer (usually the company that finances them). The reason is that research and development enrich general knowledge, which contributes to other discoveries and advances. However, the profitability perceived by a company that sells products based on its own research and development activities does not usually reflect the profitability perceived by its indirect beneficiaries. When externalities are positive, private profitability is lower than social profitability.

Answer 2

The return to schooling for society is higher than the return to schooling for the individual if human capital conveys positive externalities.

What are Externalities?

Economics defines externalities as an indirect benefit or cost to a party that arises due to the activities of a third party. They can either be positive or negative and can arise from production or consumption of goods or services.

Positive Externalities refer to an externality that renders a positive benefit to a party arising due to activities of a third party.

The benefit of schooling for society will be higher than the benefit of schooling for the individual if the human capital or the population conveys positive externalities.

That means educating a larger population should render some benefits to the society or nation as a whole.

Therefore, the correct option is C.

Learn more about externalities here:

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