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

question 233

Multiple Choice

Suppose that flu shots create a positive externality equal to $12 per shot.Further suppose that the government offers a $5 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.

---

Definitions:

Income

The financial gain received by an individual or a business, often obtained from a job, business operations, or investments.

Expenses

Costs incurred by a business in the process of earning revenue, such as salaries, rent, and utilities.

Financial Position

A snapshot of what a company owns (assets) and owes (liabilities), showing its net worth at a specific point in time.

Specific Date

A particular day identified by its unique combination of day, month, and year.