Figure 11.12 Chicken pox vaccinations for toddlers benefit society by protecting young children and by preventing an epidemic of the disease. Thus, the social benefits of chicken pox vaccinations exceed the private benefit for any quantity of vaccinations as illustrated in Figure 11.12.
-Refer to Figure 11.12.One way to obtain the economically efficient amount of chicken pox vaccinations is for governments to subsidise these vaccinations.What is the size of the per-vaccination Pigovian subsidy that the government must provide to internalise the external benefits?

Question

Figure 11.12  Chicken pox vaccinations for toddlers benefit society by protecting young children and by preventing an epidemic of the disease. Thus, the social benefits of chicken pox vaccinations exceed the private benefit for any quantity of vaccinations as illustrated in Figure 11.12.
-Refer to Figure 11.12.One way to obtain the economically efficient amount of chicken pox vaccinations is for governments to subsidise these vaccinations.What is the size of the per-vaccination Pigovian subsidy that the government must provide to internalise the external benefits?

Quizplus · Accepted Answer

To internalise the external benefits, the government must subsidise the vaccinations up to the point where the marginal social benefit (MSB) equals the marginal private cost (MPC) of vaccination. The Pigovian subsidy equals the vertical distance between the MSB and MPC curves at the efficient quantity. In this case, the efficient quantity is where the MSB curve intersects the demand curve, and the subsidy equals the difference between the two supply curves at this quantity. This is given by (P_E- P_G) in the figure.

Figure 1112 Chicken Pox Vaccinations for Toddlers Benefit Society by by Protecting