CONTEXT:

Your consulting firm has been contracted by the government of San Escobar to provide recommendations regarding influenza immunizations. Currently, the government of San Escobar does not intervene in the market for flu immunizations in any way and the market is best characterised as perfect competition. Assume that there is an equal number of older adults (+65 years old) and younger adults (18-22 years old) living in San Escobar. Assume also that each citizen buys their own immunization.

Influenza (the flu) is a highly contagious disease, usually prevented by vaccination and treated by managing symptoms. Spread by body fluids from infected people, symptoms include a runny nose and sore throat. Flu can affect anyone. The same vaccination is given to all age groups and equally effective for each age group.

please assist with whichever questions you can, thank you.

QUESTION:

(1) Juliette, who is one of the consultants on your team, says that the rate of flu immunizations is lower than socially optimal. Explain why you think she made this statement. Use both words and a graph to illustrate your answer. [1pt]

(2)After doing some research, Daniel reports to you that influenza is especially dangerous for older adults (over 65 years old) and that they are aware of these risks. He also found out that young adults (18-22) interact (face-to-face) with approximately 53 other people each day, while adults over the age of 65 interact (face-to-face) with approximately 5 other people each day. Daniel suspects that this may be relevant for Juliette's comment regarding socially optimal levels of immunizations. In particular, Daniel says that the rate of immunizations among older adults is much more below what is socially optimal than the rate of immunizations among young adults. Do you agree with Daniel? Explain your answer using both graphs and words. [3pt]

(3) What financial intervention would you recommend the government to use to bring the rates of immunization to socially optimal levels? Explain the mechanism through which this intervention works. Would this intervention be the same in each age group? If no, how would it differ between the age groups and why? [3pt]

(4) What non-financial intervention would you recommend the government implement to bring the rates of immunization to socially optimal levels? [1pt]

(5) The government asks you whether instead of using financial intervention, consolidating the existing firms producing influenza immunizations into one firm would help bring the vaccination rates to the socially optimal level. Please provide your response, including graphs. [2pt]

(6) Finally, the Noise Association of San Escobar got in touch with you saying that the factories producing influenza immunizations are very noisy and currently have their production lines working non-stop (24 hours per day). Upon further investigation you find out that the noise from the factories negatively impacts many residents and businesses. Does this change your response to question 1)? If yes, explain how. Does your response to question 3) change? Illustrate your answer using a graph. In your answer explore scenarios with different levels of noise. Assume that what Daniel found out still holds and include this information in your answer. [5pt]