Assume that that students and nonstudents have revealed their group demands for junior college education, a public good, as follows: Q = 1,500 – 0.25P, (Student demand) Q = 4,000 – P, (Nonstudent demand) where Q is the number of students educated per year and P is the price of tuition at the local 2–year junior college.
1. Calculate the aggregated demand for college education.
2. Assuming, MC = 1,000 + Q, the marginal cost of college education, determine the socially optimal amount of publicly-supported college education (hint: Demand = Supply).