Respuesta :
The statement is TRUE.
Suppose that an MBA degree creates no externality because the benefits of an MBA are captured by the student in the form of higher wages. If the government offers subsidies for MBAs. The equilibrium quantity of MBAs will be greater than the socially optimal quantity of MBAs.
MBA socially optimal quantity?
The equilibrium quantity of MBAs will equal the socially optimal quantity of MBAs.
The condition that exists when the market is in equilibrium, or when Social Marginal Cost equals Social Marginal Benefit, is known as a social optimality condition in economics. Normally, the social optimality criterion is satisfied in the absence of externalities. When externalities are absent, equilibrium is reached and there is no market failure.
In this case, it is made very apparent that there are no externalities because the advantages of having an MBA solely increase the income of their owners. If there are no externalities, then the market for MBAs is in equilibrium If the government finances MBA programs, possibly through lower taxes, then only MBA holders will profit and others without an MBA will not. This suggests that the MBA market's equilibrium amount is higher than the socially optimal quantity since one sector of the economy (the MBA market) benefits more than the rest of the economy (equilibrium for the rest of the economy).
The statement is therefore, TRUE.
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