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

The government must provide a per-vaccination Pigovian subsidy of (PE - PG) to internalise the external benefits. This is because the external benefits are equal to the difference between the social marginal benefit (PE) and the private marginal benefit (PG).

Figure 11-12 Chicken Pox Vaccinations for Toddlers Benefit Society