Consider the market for flu vaccines, in which consumption causes positive externalities by creating herd immunity. Quantity supplied is given by Qs=2+2*P Marginal Private Benefit (determines individual demand of consumers of the vaccine i.e. the benefit from not getting sick) is given by Qd=60.5-2.5*MBP. Marginal Social Costs (MPC plus the benefits of externalities) is given by Qd=69.5-2.5*MSB. Plot these 3 curves on a graph with 6 points at P=11,12,13,14,15,16. What is the deadweight loss if only free-market forces are at play (i.e. externalities are not considered by the consumers)? How much should the subsidy be to bring the market to efficient equilibrium
Consider the market for flu vaccines, in which consumption causes positive externalities by
creating herd immunity.
Quantity supplied is given by Qs=2+2*P
Marginal Private Benefit (determines individual demand of consumers of the vaccine i.e. the
benefit from not getting sick) is given by Qd=60.5-2.5*MBP.
Marginal
Plot these 3
What is the
externalities are not considered by the consumers)?
How much should the subsidy be to bring the
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