Answer to Question #205907 in Microeconomics for Mba

Question

“If education is provided free of charge to (some or all) students, someone else has to foot the bill.

In most cases, this would be the government and thus, by implication, the taxpayer. In the

2018/2019 budget of the South African government, the additional allocation to subsidise higher

education and training fully for poor and working-class students amounted to R12.4 billion. In 2019

and 2020, it is estimated it will amount to R20.3 billion and R24.3 billion, respectively.”

(4 marks)

Assuming that education and healthcare are the only expenditure items on the governments budget (and are

represented by a production possibilities curve), the increase of the above above subsidy represents…

a) A movement along the production possibilities frontier.

b) A movement towards the production possibilities frontier

c) An outward movement of the production possibilities frontier

d) An inward movement of the production possibilities frontier

Answer 1

b) A movement towards the production possibilities frontier