In an unregulated market, colleges underproduce the quantity of college degrees (Q_MKT) at price P_MKT (point B). A Pigouvian subsidy (Sub) equal to external marginal benefit (EMB) shifts demand (D) out to social demand (SD). Now, the college market produces where supply (S) intersects SD, and supplies the socially efficient quantity of college degrees (Q*) at price P* (point A).