.Externality can be positive. For example, when you take vaccination, besides protecting yourself, you can also reduce the chances that your family and friends will get sick. Suppose the demand for Covid-19 vaccination is given by Qd = 3,000 2P. If the government does not intervene the market, the supply is Qs = 1,000 +3P. The external benefit on bystanders is measured to be 500 per unit. The social value of vaccination would the private value for whoever gets the shot plus the external benefit.

a. If we allow a free market, how many units of vaccination will be traded at the equilibrium?

b. What is the socially optimal quantity of vaccination shots?

c. What can the government do to reach the socially optimal vaccination level?