Suppose That Flu Shots Create a Positive Externality Equal to $20

question 19

Multiple Choice

Suppose that flu shots create a positive externality equal to $20 per shot. What is the relationship between the market equilibrium output level and the efficient equilibrium output produced?

• A)​They are equal.
• B)​The market equilibrium output level is greater than the efficient equilibrium output level.
• C)​The market equilibrium output level is less than the efficient equilibrium output level.
• D)​None of the above.

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Definitions:

Quantity

The quantity of a tangible or intangible product or service.

Curve Shift

A movement of the supply or demand curve to the left or right, indicating a change in the market conditions.

Movement Along

Changes in the quantity demanded or supplied resulting from a change in price, illustrated by a movement along a demand or supply curve.

Policy Fairness

The extent to which a policy is considered just, equitable, and unbiased towards individuals or groups affected by it.