Figure 7-2 Figure 7-2 represents the market for vaccinations. Vaccinations are considered a benefit to society, and the figure shows both the marginal private benefit and the marginal social benefit from vaccinations.
-One effect of adverse selection in a market is that the equilibrium quantity of the product may be smaller than it would have been if there were no information problems.

Question

Figure 7-2  Figure 7-2 represents the market for vaccinations. Vaccinations are considered a benefit to society, and the figure shows both the marginal private benefit and the marginal social benefit from vaccinations.
-One effect of adverse selection in a market is that the equilibrium quantity of the product may be smaller than it would have been if there were no information problems.

Quizplus · Accepted Answer

Adverse selection can lead to a situation where high-risk individuals are more likely to purchase the product, causing a decrease in the overall demand for the product and a decrease in the equilibrium quantity. This is known as market failure, where the market fails to allocate resources efficiently. Thus, adverse selection can result in a smaller equilibrium quantity than what would have been produced in the absence of information problems.

Figure 7-2 Figure 7-2 Represents the Market for Vaccinations