A flu vaccine has an associated externality. In the absence of government intervention, the quantity of flu vaccines purchased will be the socially optimal quantity.

Question

Quizplus · Accepted Answer

A flu vaccine provides a positive externality because it not only protects the person who receives it, but it also contributes to herd immunity, protecting others who may not be able to get vaccinated. In the absence of government intervention, the quantity of vaccines purchased will be less than the socially optimal quantity because individuals may not consider the positive externalities in their decision-making. Therefore, the best answer is D - positive externality; the quantity purchased will be less than the socially optimal quantity.

A Flu Vaccine Has an Associated Externality