Suppose we are looking at a country where the post-secondary education system is completely private. Education provides significant positive externalities in any society. That means that a private educational system would not have the socially efficient number of students.

1) Which policy would you favour to bring about social efficiency in the educational system in this country: a) subsidies to private schools; b) subsidies to students; or c) public provision (making all schools public)? Why?

2) Should tuition (what is charged to students) be free in a socially efficient system?