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

question 64

Multiple Choice

Suppose that flu shots create a positive externality equal to $12 per shot.Further suppose that the government offers a $15 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:

Alanine

A non-essential amino acid used by the body to build proteins and play a key role in glucose metabolism.

Distilled Water

Water that has been boiled into vapor and recondensed into liquid, removing impurities and dissolved minerals.

Denaturation

The process by which proteins lose their native structure due to external stress or compounds, leading to a loss of biological activity.

Hydrolysis

A chemical reaction in which water is used to break down the bonds of a compound.