Question
The government of your town determines that the private marginal benefit (PMB) associated with flu shotsis PMB = 28-4Q, where Q is the number of
The government of your town determines that the private marginal benefit (PMB) associated with flu shotsis PMB = 28-4Q, where Q is the number of town residents receiving the shot.Theprivate marginal cost(PMC)of flu shots is PMC = 2Q + 4.Flu shots generate external marginal benefits (EMB), which are given byEMB = 11-Q.a.Find the free market equilibrium quantity and price of flu shots. Depict your answer graphicallybelow PUBP741Sita Slavov2.The government of your town determines that the private marginal benefit (PMB) associated with flu shotsis PMB = 28-4Q, where Q is the number of town residents receiving the shot.Theprivate marginal cost(PMC)of flu shots is PMC = 2Q + 4.Flu shots generate external marginal benefits (EMB), which are given byEMB = 11-Q.a.Find the free market equilibrium quantity and price of flu shots. Depict your answer graphicallybelow.b.Is the free market outcome efficient? If so, explain why. If not, find the efficient quantity andillustrate your answer graphically (include the deadweight loss under the free market outcome) What is the appropriate Pigouvian subsidy for each flu shot? Show your work
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