Suppose That a Vaccine Is Developed for a Highly Contagious

question 127

Multiple Choice

Suppose that a vaccine is developed for a highly contagious strain of flu. The likelihood that anyone will get this flu decreases as more people receive the vaccine. One of the demand curves below represents the private demand for the vaccine and the other represents the social demand for the vaccine. The government could increase total economic surplus by:

• A)taxing production of the vaccine.
• B)encouraging people to pay each other to get the vaccine.
• C)subsidizing production of the vaccine.
• D)providing 250 doses of the vaccine for free.

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Definitions:

Direct Labor-hours

The hours that workers contribute directly towards the manufacture of goods over a specified period.

Fixed Manufacturing Overhead

Costs associated with production that do not vary with the level of output, such as depreciation of machinery and the salary of the factory manager.

Job Cost

The total cost of labor, materials, and overhead allocated to a specific job or project.

Predetermined Overhead Rate

A rate used to allocate manufacturing overhead to individual products or job orders, calculated before the accounting period begins based on estimated costs and activity levels.