Answered: The table below shows the marginal…

Microeconomics: Principles & Policy

14th Edition

ISBN:9781337794992

Author:William J. Baumol, Alan S. Blinder, John L. Solow

Publisher:William J. Baumol, Alan S. Blinder, John L. Solow

Chapter22: Contemporary Issues In The U.s. Economy

Section: Chapter Questions

Problem 5DQ

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Question

The table below shows the marginal private benefits and the marginal private costs of flu shots. The marginal private benefits represent the market demand curve (Dint) and the marginal private cost represent the market supply curve (Sint) Supposed that getting a flu shot generates a positive externality, and the external benefit is $1000 per thousand flu shots. Compared to the socially optimal amount of flu shots, the amount of flu shots taken at the market equilibrium is ________ shots to ________ (either few or many)

Marginal private benefits
Dinternal
$2,500
$2,250
$2,000
$1,750
$1,500
$1,250
$1,000
$750
$500
Marginal private costs
Sinternal
$1,800
$1,900
$2,000
$2,100
$2,200
$2,300
$2,400
$2,500
$2,600

Quantity of flu shots
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
Marginal private benefits
Dinternal
$2,500
$2,250
$2,000
$1,750
$1,500
$1,250
$1,000
$750
$500

Expert Solution

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Marginal benefits are the maximum amount a consumer will pay for an additional product or service. A marginal benefit is also the surplus satisfaction that a consumer receives when an additional product or service is purchased. The marginal benefit generally falls as consumption rises.

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