The table above gives the marginal social cost (which equals the price), marginal private benefit, and marginal social benefit of students attending Diablo Valley College (DVC) in Concord, California

a. When 4,500 students attend DVC, what does the marginal external benefit equal?
b. If the market is competitive and left without government intervention, what is the quantity of students that will attend DVC and what will be the price of a course?
c. What is the efficient quantity of students attending DVC?
d. If the government can set the price per course, in order to have the efficient quantity of students attending DVC, what should the government set as the price?

a. The marginal external benefit equals $40, the difference between the marginal social benefit ($60 ) and the marginal private benefit ($20 ).
b. 3,500 students will attend and the price of a course will be $60.
c. The efficient quantity is 4,000 students because at this quantity the marginal social benefit equals the marginal social cost.
d. In order to have 4,000 students attend DVC, the government must set the price at $40 per course.