Getting a Flu Shot Reduces the Chances of Spreading the Illness

question 27

Multiple Choice

Getting a flu shot reduces the chances of spreading the illness to one's classmates and friends. Why, then, is this considered a market failure due to external benefits?

• A) because the number of people who obtain flu shots is less than the socially optimal quantity
• B) because too many people actually get the flu shot
• C) because flu shots are not 100% effective
• D) because flu shots are priced too high relative to the cost of producing them

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Definitions:

Expected Value

A calculation reflecting the average expected outcome of a probabilistic event, considering all possible outcomes weighted by their chances of occurrence.

Probability

The measure of the likelihood that an event will occur, quantified as a number between 0 and 1.

Invest

To allocate resources, usually money, with the expectation of generating an income or profit.

Scrap Value

The estimated resale value of an asset at the end of its useful life, often considered in depreciation calculations.