Suppose That Flu Shots Create a Positive Externality Equal to $12

question 317

Multiple Choice

Suppose that flu shots create a positive externality equal to $12 per shot.Further suppose that the government offers a $12 per-shot subsidy to producers.What is the relationship between the equilibrium quantity and the socially optimal quantity of flu shots produced?

• A) They are equal.
• B) The equilibrium quantity is greater than the socially optimal quantity.
• C) The equilibrium quantity is less than the socially optimal quantity.
• D) There is not enough information to answer the question.

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Definitions:

Malthus's Theory

A theory proposed by Thomas Malthus suggesting that population growth is potentially exponential while the growth of the food supply or other resources is linear, leading to overpopulation and societal strain.

Eat

The act of consuming food for nutritional sustenance.

Social Determinants

Factors in society such as economic status, education, and environment that influence individual and group health.

Industrialization

The process of transforming economies from based on agriculture to one based on the manufacturing of goods, characterized by technological innovation and urbanization.