Suppose That a Vaccine Is Developed for a Highly Contagious

question 38

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 in the diagram reflects private benefits and the other reflects social benefits.
Refer to the figure above.This externality could most effectively be corrected by:

• A)taxing vaccines.
• B)encouraging people to negotiate private payments to those who receive the vaccine.
• C)subsidizing vaccines.
• D)free provision of 275 vaccines.

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Definitions:

Production

The process of creating goods or services through the combination of labor, materials, and technology, which contributes to economic output.

Maximum Profit

The highest possible financial gain that a company can achieve in a given period under existing conditions.

Natural Monopoly

A market condition in which a single supplier is more efficient in producing the product than any other potential producers due to high fixed or startup costs.

Electricity

A form of energy resulting from the existence of charged particles, used as a power source.