Suppose that a vaccine is developed for a highly contagious strain of flu. The likelihood that anyone will get this flu decreases as more people receive the vaccine. One of the demand curves below represents the private demand for the vaccine and the other represents the social demand for the vaccine. The socially optimal quantity of the vaccine is ______ doses per day.
A)50
B)75
C)100
D)125

Question

Suppose that a vaccine is developed for a highly contagious strain of flu. The likelihood that anyone will get this flu decreases as more people receive the vaccine. One of the demand curves below represents the private demand for the vaccine and the other represents the social demand for the vaccine.  The socially optimal quantity of the vaccine is ______ doses per day.
A)50 
B)75 
C)100 
D)125

Quizplus · Accepted Answer

The socially optimal quantity of the vaccine is where the marginal social benefit (MSB) equals the marginal social cost (MSC). The private demand curve represents the marginal private benefit (MPB), which is less than the MSB because it does not take into account the positive externality of reducing the spread of the flu to others. The social demand curve includes this positive externality and represents the MSB. Based on the graph, the socially optimal quantity occurs at a quantity of 100 doses per day, where the MSB crosses the MSC curve. Therefore, the best choice is C) 100.

Suppose That a Vaccine Is Developed for a Highly Contagious