The following graphs illustrate how positive externalities can be generated by both the production (supply) and consumption (demand) of the vaccine. Dead Weight Loss Supply Marginal Cost P Market Social Quantity Optimum D2 Marginal Social Benefit Positive Externality D₁- Marginal Private Benefit ■FIGURE 5-4 Price of Marginal benefit, MB Underproduction S-PMC SMC = PMC-MB -Deadweight loss D= PMB = SMB Market Failure Due to Positive Production Externality in the Oil Exploration Market Expenditures on oil exploration by any company have a positive externality because they offer more profitable opportuni- ties for other companies. This leads to a social marginal cost that is below the private marginal cost, and a social optimum quantity (Q₂) that is greater than the competitive market equilibri um quantity (Q). There is underpro- duction of Q-Q, with an associated deadweight loss of area ABC. Quantity of oil Positive Externality- Demand Please review the following on the foundations of externalities. • B.4.2.2 Advanced Explanation -Rival and Excludable Goods •B.4.2.3 Advanced Explanation-Externalities Positive Externality-Supply After reviewing the graphic, article and video, respond to the following. QuickWrite Question: 1. Are Flu and Covid vaccinations for the individual or society? (explain) 2. Why do economists advocate for government support (incentives-both supply and demand) for these vaccines? 3. Analysis- Using one of the graphs above, create or cite an example of a government program to incentivize the production or consumption of the vaccine. 4. Free Rider- Briefly explain how individual who DO NOT get the vaccine also benefit from these programs.
The following graphs illustrate how positive externalities can be generated by both the production (supply) and consumption (demand) of the vaccine. Dead Weight Loss Supply Marginal Cost P Market Social Quantity Optimum D2 Marginal Social Benefit Positive Externality D₁- Marginal Private Benefit ■FIGURE 5-4 Price of Marginal benefit, MB Underproduction S-PMC SMC = PMC-MB -Deadweight loss D= PMB = SMB Market Failure Due to Positive Production Externality in the Oil Exploration Market Expenditures on oil exploration by any company have a positive externality because they offer more profitable opportuni- ties for other companies. This leads to a social marginal cost that is below the private marginal cost, and a social optimum quantity (Q₂) that is greater than the competitive market equilibri um quantity (Q). There is underpro- duction of Q-Q, with an associated deadweight loss of area ABC. Quantity of oil Positive Externality- Demand Please review the following on the foundations of externalities. • B.4.2.2 Advanced Explanation -Rival and Excludable Goods •B.4.2.3 Advanced Explanation-Externalities Positive Externality-Supply After reviewing the graphic, article and video, respond to the following. QuickWrite Question: 1. Are Flu and Covid vaccinations for the individual or society? (explain) 2. Why do economists advocate for government support (incentives-both supply and demand) for these vaccines? 3. Analysis- Using one of the graphs above, create or cite an example of a government program to incentivize the production or consumption of the vaccine. 4. Free Rider- Briefly explain how individual who DO NOT get the vaccine also benefit from these programs.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:The following graphs illustrate how positive externalities can be generated by both the production (supply) and
consumption (demand) of the vaccine.
Dead Weight Loss
Supply Marginal Cost
P
Market Social
Quantity Optimum
D2 Marginal Social Benefit
Positive Externality
D₁- Marginal Private Benefit
■FIGURE 5-4
Price of
Marginal
benefit,
MB
Underproduction
S-PMC
SMC = PMC-MB
-Deadweight loss
D= PMB = SMB
Market Failure Due to Positive
Production Externality in the Oil
Exploration Market Expenditures
on oil exploration by any company
have a positive externality because
they offer more profitable opportuni-
ties for other companies. This leads
to a social marginal cost that is below
the private marginal cost, and a social
optimum quantity (Q₂) that is greater
than the competitive market equilibri
um quantity (Q). There is underpro-
duction of Q-Q, with an associated
deadweight loss of area ABC.
Quantity of oil
Positive Externality- Demand
Please review the following on the foundations of externalities.
• B.4.2.2 Advanced Explanation -Rival and Excludable Goods
•B.4.2.3 Advanced Explanation-Externalities
Positive Externality-Supply
After reviewing the graphic, article and video, respond to the following.
QuickWrite Question:
1. Are Flu and Covid vaccinations for the individual or society? (explain)
2. Why do economists advocate for government support (incentives-both supply and demand) for these
vaccines?
3. Analysis- Using one of the graphs above, create or cite an example of a government program to incentivize
the production or consumption of the vaccine.
4. Free Rider- Briefly explain how individual who DO NOT get the vaccine also benefit from these programs.
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