Question

3. If you get the H1N1 Flu vaccine, not only are your chances of getting sick reduced, but you being healthy also benefits the people you interact with on a daily basis. a. Draw a graph showing the market for H1N1 flu shots. Assume that the marginal cost of each H1N1 flu shot is equal to the marginal social cost and that the demand curve is downward sloping (use Fig. 1 to help you get started). b. Will the marginal social benefit curve be higher, lower, or the same as the demand curve? Why? Draw the marginal social benefit curve into your diagram. c. In your diagram, show the market equilibrium quantity and the socially optimal quantity of flu shots. Is the market equilibrium quantity of flu shots socially efficient? Why or why not? d. Many university health centers offer free flu shots to students and employees. Does this solution necessarily achieve efficiency? Using your diagram, explain your answer.

Answer 1

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