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

question 164

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:

Residual Value

The projected worth of an asset upon reaching the conclusion of its serviceable duration.

Present Value Factors

Numeric factors used in financial calculations to determine the present value of a future amount by accounting for time value of money.

Bargain Purchase Option

An option in a lease agreement that allows the lessee to purchase the leased asset at a price significantly lower than its expected fair market value at the end of the lease term.