Figure 4-22
Chicken pox vaccinations for toddlers benefit society by protecting young children and by preventing an epidemic of the disease. Thus, the marginal social benefits of chicken pox vaccinations exceed the marginal private benefit for any quantity of vaccinations as illustrated in Figure 4-22.
-Refer to Figure 4-22.What is the value of the net gain to society as a result of subsidizing chicken pox vaccinations?

Question

Figure 4-22
  Chicken pox vaccinations for toddlers benefit society by protecting young children and by preventing an epidemic of the disease. Thus, the marginal social benefits of chicken pox vaccinations exceed the marginal private benefit for any quantity of vaccinations as illustrated in Figure 4-22.
-Refer to Figure 4-22.What is the value of the net gain to society as a result of subsidizing chicken pox vaccinations?

Quizplus · Accepted Answer

The value of the net gain to society as a result of subsidizing chicken pox vaccinations can be calculated as the difference between the total social benefit (TSB) and the total private cost (TPC). In Figure 4-22, TSB is equal to the area under the demand curve (DEFG) up to the quantity of Q*, which is the socially optimal quantity of vaccinations. TPC is equal to the area under the supply curve (SHG) up to Q*. The net gain to society is thus equal to the area of the triangle EFH, which represents the positive externality (i.e., the difference between TSB and TPC) generated by the vaccinations. Therefore, the correct answer is C.

Figure 4-22 Chicken Pox Vaccinations for Toddlers Benefit Society by Society