The Demand for Injections to Immunize Against a Disease Is

question 110

Essay

The demand for injections to immunize against a disease is given as:
P = 13 0.0005Q,
where P = price in dollars, and Q = quantity measured as number of shots per month. The marginal social benefit function has the same vertical intercept as the demand curve and one half the slope (one half in absolute value). The marginal cost of injections is a constant $8.
a. With a competitive market, what price and quantity will prevail, assuming that there is no government intervention?
b. Explain why the demand curve and marginal social benefit functions are different in this case. What is the socially optimal quantity in the market?
c. What government policies could be used to bring about the optimal outcome?

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Definitions:

Vertical Mergers

Vertical mergers involve the combination of two or more companies that operate at different levels within the supply chain of a common product or service, aiming to increase efficiency or reduce costs.

Relevant Market

Represents the market segment or area where the competition and customer demand for a company's products or services are analyzed.

Consumer Product Safety Commission

A U.S. government agency responsible for the regulation of the sale and manufacture of consumer products to ensure their safety.

Social Regulation

Rules imposed by government to correct market failures and protect individuals and the environment from negative externalities, focusing on areas such as workplace safety, environmental protection, and public health.