The Privately-Owned School System in Fort Yaman Has a Virtually

The privately-owned school system in Fort Yaman has a virtually unlimited capacity. It accepts all applicants and operates on both tuition and private donations. Although every resident places value on having an educated community, the school's revenues have suffered lately due to a large decline in private donations from the elderly population. Because the benefit that each citizen receives from having an educated community is a public good, which of the following would not be correct?

A) The free-rider problem causes the private market to undersupply education to the community.
B) The government can potentially help the market reach a socially optimal level of education.
C) A tax increase to pay for education could potentially make the community better off.
D) The private market is the best way to supply education.

Correct Answer:

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