Suppose that the marginal private benefit of a new vaccine could be measured as $M P B = 10 -$ $Q$. Suppose that the marginal social benefit could be measured as $M S B = 12 - Q$. Suppose that the private marginal cost curve could be measured as $M P C = Q$. What quantity represents the optimal societal consumption of the vaccine?
A) 4 units.
B) 5 units.
C) 6 units.
D) 10 units.

Question

Quizplus · Accepted Answer

The optimal societal consumption of the vaccine can be found where the marginal social benefit (MSB) equals the marginal social cost (MSC). We can find MSC by adding the private marginal cost (MPC) and any external costs (which are zero in this case). Thus,

MSC = MPC + External Costs
MSC = Q + 0
MSC = Q

Setting MSC equal to MSB, we get:

Q = 12 - Q

Solving for Q, we get Q = 6.

Therefore, the optimal societal consumption of the vaccine is 6 units.

Suppose That the Marginal Private Benefit of a New Vaccine MPB=10−M P B = 10 -MPB=10−

Suppose That the Marginal Private Benefit of a New Vaccine $M P B = 10 -$