Refer to the Graph Shown, Which Shows the Demand and Supply

question 81

Multiple Choice

Refer to the graph shown, which shows the demand and supply for a new vaccine against the common cold. Once vaccinated, a person cannot catch a cold or give a cold to someone else. If government does not subsidize the production of this vaccine:

• A) the number of workers hired to produce the vaccine will be less than the socially efficient level.
• B) the firm producing the vaccine will use too much capital in producing the vaccine.
• C) the vaccine will be overproduced because consumers will not take into account the fact that many of their neighbors and co-workers will consume the vaccine.
• D) no positive externality can be created.

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Definitions:

Federal Money

Funds provided by the federal government, often to support state or local projects, policies, or to provide social services.

Incentive-based Regulation

A regulatory approach that uses rewards or penalties to motivate entities to perform in ways that align with policy goals or regulatory standards.

Command-and-control Regulation

Regulatory approach where the government sets specific standards or limitations on the activities of businesses, often related to environmental or safety measures.

Pollution Permits

Allowances provided by government regulations that permit companies to emit a certain level of pollutants.