build ×021)From Mainland C × 08ctx-delia furtado-0 uiz probGuid FLPLCOAB01010000

Question

build ×021)From Mainland C × 08ctx-delia furtado-0 uiz probGuid FLPLCOAB01010000003a385bc0 7 Flu vaccines A flu vaccine prevents a person from getting sick. The demand for flu vaccines is glven by P- 18-050 s the price of a flu vaccine and Q is the quantity of flu vaccines in millions. This demand s represented by the blue , where P in the graph below. Each flu vaccine costs $10. This is the marginal cost of a vaccine, graphed in orange (labeled MC) in the graph below. However, vaccines create a positive extermality. By preventing vaccinated people from getting sick, a flu vaccine imits the spread of the flu to others. So when more people are vaccinated, even people who aren't vaccinated are ess likely to get sick. The marginal external benefit to of a filu vaccine is glven by P-$4. This is the green curve (labeled MBE) in the graph below PRICE, COST IDallars 16 Price with Subaidy 10 04121 20 a. Using the purple ine (d.amond symbois), graph the social manginal benee (MBs) curve b. Because people consider only their own benefit when making purchases, the equilibrium quantity will be 20miloneacones. ] This is[ 12 mion vacc nes less ]than the socany emoere quantty c. using the red ine (cross symmbois graph the new price of a flu vacoine when this subsidly is implemented. That s graph the marginal cost of a vaccine plus the subsidy paid to suppliens of vaccines Suppose the government tries to minimize this problem by subsidizing flu vaccines. If the government wants to each the socialy emaent quarery, should give.[Select ] subsidy per vaccine. Copyright NoticesTerms of Use Privecy Netce Security Notce

Explanation / Answer

Marginal Social Benefits = Marginal Private Benefit + Marginal external Benefit

Here Demand function is : Q = 32-2P

TR = 32P-2P2

Marginal Benefit (private) = dTR/dP = 32-4P

Hence, Marginal social benefit = 32-4P+4 = 36-4P

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