Covid vaccination is likely to substantially reduce virus transmission by reducing the pool of people who become infected, and reducing virus levels in people who get infected. Suppose the vaccine market is perfectly competitive, and that the external benefit created by vaccination is $200 per dose. (a) On an appropriate diagram, label the equilibrium quantity in the vaccine market as Qm. Also show the quantity of vaccine that would maximise social surplus from the vaccine market as Q*. Fully explain your answer and label the area of deadweight loss (if any, and explain in details how it is derived). (a) Suppose the government provides a subsidy of $100 per dose. Using the same diagram as part a, fully explain if this will completely eliminate the deadweight loss (if any)? (b) An economist says that the introduction of Covid-vaccine lotteries by the government can boost the vaccination rates (e.g., anyone who takes the jab will stand a chance to win the lottery). Do you think it is economically justified for the government to do so?

Covid vaccination is likely to substantially reduce virus transmission by reducing the pool of people who become infected, and reducing virus levels in people who get infected. Suppose the vaccine market is perfectly competitive, and that the external benefit created by vaccination is $200 per dose. (a) On an appropriate diagram, label the equilibrium quantity in the vaccine market as Qm. Also show the quantity of vaccine that would maximise social surplus from the vaccine market as Q*. Fully explain your answer and label the area of deadweight loss (if any, and explain in details how it is derived). (a) Suppose the government provides a subsidy of $100 per dose. Using the same diagram as part a, fully explain if this will completely eliminate the deadweight loss (if any)? (b) An economist says that the introduction of Covid-vaccine lotteries by the government can boost the vaccination rates (e.g., anyone who takes the jab will stand a chance to win the lottery). Do you think it is economically justified for the government to do so?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter19: Externalities And Public Goods

Section: Chapter Questions

Problem 19.7P

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