Economics of Health Externalities.

Scientists have discovered new vaccines for diseases A and B. The private and social demand curves for each vaccine are:

Q A private = 50 P (1)

Q A social = 100 P (2)

Q B private = 50 2P (3)

Q B social = 120.711 2P (4)

Both vaccines have a marginal cost of $10 and the market is perfectly competitive.

1. Which vaccine faces a more elastic demand?

2. Is there an externality for vaccines A and B?

3. Calculate the social loss for both vaccines (round to integer). Interpret the result. [Hint: Draw the graphs and calculate the triangle area.]