Figure 5.6

Shingles vaccinations for adults benefit society by protecting adults and by preventing an epidemic of the disease. Thus, the social benefits of shingles vaccinations exceed the private benefit for any quantity of vaccinations as illustrated in Figure 5.6.
-Refer to Figure 5.6.One way to obtain the economically efficient amount of shingles vaccinations is for governments to subsidize the consumers of these vaccinations.What is the size of the per-vaccination Pigovian subsidy that the government must provide to internalize the external benefits?

Question

Figure 5.6
  
Shingles vaccinations for adults benefit society by protecting adults and by preventing an epidemic of the disease. Thus, the social benefits of shingles vaccinations exceed the private benefit for any quantity of vaccinations as illustrated in Figure 5.6.
-Refer to Figure 5.6.One way to obtain the economically efficient amount of shingles vaccinations is for governments to subsidize the consumers of these vaccinations.What is the size of the per-vaccination Pigovian subsidy that the government must provide to internalize the external benefits?

Quizplus · Accepted Answer

The Pigovian subsidy is equal to the difference between the marginal external benefit and the marginal private benefit. In this case, the marginal external benefit is PE and the marginal private benefit is PG. Therefore, the Pigovian subsidy is (PE - PG).

Figure 5.6 Shingles Vaccinations for Adults Benefit Society by Protecting Adults and Society