Question
The market demand curve for rabies shots reflects only the marginal private benefit (MPB) that owners of vaccinated pets receive from having their pets vaccinated.
The market demand curve for rabies shots reflects only the marginal private benefit (MPB) that owners of vaccinated pets receive from having their pets vaccinated. Since this is a market with positive externalities, suppose the government provides a subsidy to pet owners that is equal to the marginal social benefit (MSB) minus the marginal private benefit (MPB), in this case, $12 per rabies shot. With the subsidy, the demand curve will shift and become the same as the marginal social benefit (MSB) curve.
Movethe demand curve below to illustrate this shift. Be sure to take the exact size of the subsidy into account. Precise answers are required.
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