Flu injections are associated with a positive externality. (Those who come in contact with people who are inoculated are helped as well.) Given perfect competition with no government intervention in the vaccination market, which of the following holds?
A) At the current output level, the marginal social benefit exceeds the marginal private benefit.
B) The current output level is inefficiently low.
C) A subsidy on each injection could turn an inefficient situation into an efficient one.
D) All of the above are correct.

Question

Quizplus · Accepted Answer

A) At the current output level, the marginal social benefit exceeds the marginal private benefit because of the positive externality.
B) The current output level is inefficiently low because the marginal social benefit exceeds the marginal cost, indicating that society would benefit from more vaccinations.
C) A subsidy on each injection could turn an inefficient situation into an efficient one by offsetting the gap between the marginal social benefit and the marginal private cost, leading to an increase in the level of vaccinations and a more efficient allocation of resources.

Flu Injections Are Associated with a Positive Externality