Post by: am7272 on Nov 23, 2022
The graph shows the supply curve (S=MC), the demand curve (D=MB), and the marginal social benefit curve (MSB) in market for vaccinations.
Assume that P1=$1.05, P2=$2.95, P3=$3.80, P4=$4.90, Q1=175, and Q2=395. The market for vaccinations has a ________ (negative/positive) externality that results in a deadweight loss of ________.
Please round your final answer to two decimal places.
◦ negative, $93.50
◦ positive, $93.50
◦ positive, $214.50
◦ negative, $214.50
Post by: kyledifference on Nov 23, 2022
The market for vaccinations has a positive externality because the marginal social benefit of vaccinations exceeds the marginal private benefit of getting a vaccination. When the market has a positive externality, the market produces a quantity that is less than the efficient amount.
The market equilibrium occurs where the demand curve (D=MB) intersects the supply curve (S=MC), at a price of P2=$2.95 and a quantity of Q1=175.
The efficient equilibrium, however, occurs where the marginal social benefit curve (MSB) intersects the supply curve (S=MC), at a price of P3=$3.80 and a quantity of
The positive externality results in a deadweight loss equal to the triangle in the graph:
Therefore, deadweight loss = 0.5 * base * height = 0.5 * (Q2 - Q1) * (P4 - P2) =
