Free Market for K-12: Demand side No public schools and no regulation requiring school attendance Value placed on education: Additional earning to the individual as a result of extending education Better decision making Interpersonal relationships Pure satisfaction from learning
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Public Goods Private goods are produced through the market because they are divisible and come in units small enough to be afforded by individual buyers. Private goods are subject to the exclusion principle, the idea that those unable and unwilling to pay are excluded from the benefits of the product. Public goods would not be produced through the market, because they are indivisible and are not subject to the exclusion principle. National defense is a public good that is there for all of the U.S. people. Government paid for that through tax revenue. Those who receive benefits without paying are part of the so-called free-rider problem. Private producers would not be able to find enough paying buyers for public goods because of the free-rider problem. Therefore, public goods are not produced voluntarily through the market but must be provided by the public sector and financed by compulsory taxes. Quasi-public goods are those that have large positive externalities, so government will sponsor their provision. Otherwise, they would be underproduced. Medical care, education, and public housing are examples. Public and quasi-public goods are purchased through government, by group, or collective, choice. In a representative democracy that means voting for the candidate whose priorities for spending most closely match your own. According to the survey result, Americans rate education as their number one priority during the last presidential campaign in 2000. Therefore, candidates tried to emphasize their education policies to get more votes. Resources are reallocated from private to public use by levying taxes on households and businesses, thus reducing their purchasing power and using the proceeds to purchase public and quasi-public goods. This can bring about a significant change in the composition of the economy’s total output. Benefit – cost analysis is a technique in decision making process of the public sector. The concept involves comparing the marginal benefit (MB) of extra public goods with the marginal cost (MC) of providing the additional public goods. The rule to follow is that marginal benefit should equal or exceed the marginal cost. If the marginal cost exceeds the marginal benefit, that project should not be selected. When several projects whose MB exceeds or equal to MC are available, the project with the highest total benefit will be selected.
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