In a large city, the market for vaccines is perfectly competitive. Let P be the price of vaccines in dollars and Q be the quantity traded of vaccines. Assume the supply of vaccines is given by Qs - 200P, and the demand of vaccines is given by: QD = 1200 - 100P. a) What is the equilibrium price and quantity of vaccines? b) How much profit will a firm operating in this perfectly competitive market earn in the long run? c) Suppose the government decides the price of vaccines is too high because vaccines have an external marginal benefit of $1 per vaccines, and therefore limits the price of vaccines to $1 per vaccines. To avoid a shortage of vaccines, the government agrees to pay vaccines providers (sellers) enough of a subsidy to avoid a shortage. i) Write the equation for the new social demand. ii) What is the socially optimal number of vaccines consumed?

In a large city, the market for vaccines is perfectly competitive. Let P be the price of vaccines in dollars and Q be the quantity traded of vaccines. Assume the supply of vaccines is given by Qs - 200P, and the demand of vaccines is given by: QD = 1200 - 100P. a) What is the equilibrium price and quantity of vaccines? b) How much profit will a firm operating in this perfectly competitive market earn in the long run? c) Suppose the government decides the price of vaccines is too high because vaccines have an external marginal benefit of $1 per vaccines, and therefore limits the price of vaccines to $1 per vaccines. To avoid a shortage of vaccines, the government agrees to pay vaccines providers (sellers) enough of a subsidy to avoid a shortage. i) Write the equation for the new social demand. ii) What is the socially optimal number of vaccines consumed?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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In a large city, the market for vaccines is perfectly competitive. Let P be the price of
vaccines in dollars and Q be the quantity traded of vaccines. Assume the supply of
vaccines is given by Qs - 200P, and the demand of vaccines is given by:
Qp = 1200 - 1000
a) What is the equilibrium price and quantity of vaccines?
b) How much profit will a firm operating in this perfectly competitive market earn in
the long run?
c) Suppose the government decides the price of vaccines is too high because
vaccines have an external marginal benefit of $1 per vaccines, and therefore limits
the price of vaccines to $1 per vaccines. To avoid a shortage of vaccines, the
government agrees to pay vaccines providers (sellers) enough of a subsidy to avoid a
shortage.
i) Write the equation for the new social demand.
ii) What is the socially optimal number of vaccines consumed?

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