Question
PLEASE HELP ME: The inverse demand (AKA private marginal benefit) for a vaccine against a specific disease is given by P=13 - 0.0005Q Where Q
PLEASE HELP ME:
The inverse demand (AKA "private marginal benefit") for a vaccine against a specific disease is given by
P=13 - 0.0005Q
Where Q is the number of doses/shots given. The supply (AKA "private marginal cost") is horizontal at P=8. In other words, the marginal and average cost of manufacturing the vaccine is constant at $8.
The vaccine also creates a positive external benefit in reducing the spread of the disease to others. TheMarginal External Benefit is given by:
MEB = 7 - 0.00025Q
13. Suppose there is a competitive market for the vaccines. What is the competitive equilibrium quantity?
14. What is the competitive market equilibrium price for vaccines?
15. When accounting for the external benefit of the vaccine, what is the efficient quantity of vaccines?
16. What is the deadweight loss created by the positive externality?
17. Suppose the government decides to encourage the efficient quantity of vaccines by providing a subsidy. The subsidy is set at a specified dollar amount per dosage purchased. What subsidy ($) will lead to the efficient quantity of doses being administered?
18. How much will the government need to spend on the subsidy in total?
(i.e. "Government Expenditure")
19. Is the benefit of the subsidy found above greater than the government's cost of the subsidy?
Group of answer choices
Yes because the subsidy will increase producer and consumer surplus by an amount more than the subsidy
Yes because the government's expenditure is less than the reduction in deadweight loss
No because the consumer surplus and producer surplus increase by an amount less than the government's expenditure on the subsidy
Yes because the government's expenditure is less than the sum of the added consumer and producer surplus and added external benefit
Yes because the sum of consumer and producer surplus is more than the total external benefit
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