Asked by Beverly Chafton on May 30, 2024
Verified
Flu vaccines often provide both private benefits to individuals and positive external benefits to other members of society.As a result,without government intervention,one would find:
A) too many doses of flu vaccine being produced since external benefits would not be considered.
B) too few doses of flu vaccine being produced since external benefits would not be considered.
C) the optimal amount of doses of flu vaccines being produced since external benefits would not be considered.
D) a shortage of doses of flu vaccine because their marginal social benefit is overestimated.
Positive External Benefits
Benefits experienced by third parties or the society at large due to an economic activity, which are not reflected in the market price of goods or services.
Government Intervention
The involvement of the government in the market to correct market failures and promote economic stability and growth.
Flu Vaccines
Vaccines that protect against influenza, a contagious respiratory illness caused by influenza viruses.
- Achieve an understanding of the notions related to private and external benefits in relation to public goods and common assets.
- Understand the effects of positive externalities on the level of production and consumption in the absence of government intervention.
Verified Answer
MC
Mabel CurrieMay 30, 2024
Final Answer :
B
Explanation :
Without government intervention, private producers would only consider the private benefits of producing flu vaccines and not take into account the positive external benefits the vaccines have on other members of society. This would lead to underproduction of vaccines since the marginal social benefit (private benefit plus positive external benefits) would exceed the private benefit alone. Therefore, choice B, too few doses of flu vaccine being produced since external benefits would not be considered, is the best choice.
Learning Objectives
- Achieve an understanding of the notions related to private and external benefits in relation to public goods and common assets.
- Understand the effects of positive externalities on the level of production and consumption in the absence of government intervention.