Edgar's expected private benefit from the flu shot is $15, and it would cost him $20 to get vaccinated. Therefore, which statement is correct?
A) It is socially optimal for Edgar to get the flu shot if the social benefits of the shot exceed $20.
B) The external benefits of the flu shot equal $5 ($20 - $15).
C) Even without a government subsidy, Edgar is certain to be vaccinated.
D) The deadweight loss is eliminated if Edgar is vaccinated and the external benefits are $4.

Question

Quizplus · Accepted Answer

Since Edgar's expected private benefit from the flu shot is less than the cost of getting vaccinated, he may not choose to get vaccinated. However, the social benefits of him getting vaccinated exceed the cost, so it is socially optimal for him to get the flu shot if the social benefits of the shot exceed $20. Therefore, answer choice A is correct. Answer choice B is incorrect because the external benefits would be $15, not $5. Answer choice C is incorrect because there is no guarantee that Edgar will get vaccinated even if there is no government subsidy. Answer choice D is incorrect because the question does not provide enough information to calculate the deadweight loss.

Edgar's Expected Private Benefit from the Flu Shot Is $15