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 in the diagram reflects private benefits and the other reflects social benefits.
Refer to the figure above.This externality could most effectively be corrected by:
A) taxing vaccines.
B) encouraging people to negotiate private payments to those who receive the vaccine.
C) subsidizing vaccines.
D) free provision of 275 vaccines.

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 in the diagram reflects private benefits and the other reflects social benefits. 
Refer to the figure above.This externality could most effectively be corrected by:
A) taxing vaccines. 
B) encouraging people to negotiate private payments to those who receive the vaccine. 
C) subsidizing vaccines. 
D) free provision of 275 vaccines.

Quizplus · Accepted Answer

A subsidy can shift the private demand curve to the social demand curve.

Suppose That a Vaccine Is Developed for a Highly Contagious