Suppose that flu shots create a positive externality equal to $8 per shot. Further suppose that the government offers a $11-per-shot subsidy to producers. What is the relationship between the equilibrium quantity and the socially optimal quantity of flu shots produced?
a. They are equal.
b. The equilibrium quantity is greater than the socially optimal quantity.
c. The equilibrium quantity is less than the socially optimal quantity.
d. There is not enough information to answer the question.
b
You might also like to view...
Classical growth theory argues that when real GDP per person rises above the subsistence level
A) technological change slows down, stagnating the economy. B) population growth increases, driving real GDP per person back to subsistence level. C) people don't want to work as much, decreasing labor supply. D) the economy enjoys a period of permanent growth.
Despite the Postal Service's legal monopoly over first-class mail delivery,
a. the price of a first-class stamp has not changed for over a decade b. the price of a first-class stamp has fallen as delivery volume increased c. it still produces along the inelastic range of the market demand curve d. its faces competition from foreign suppliers e. it has lost huge chunks of other mail classes to private firms