1. How did Covid-19 affect businesses and the overall economy?
2. Governments and pharmaceutical companies rushed quickly ahead to develop a vaccine. Vaccinations and immunizations are examples of positive externalities. A positive externality is when an activity creates a benefit for those who are not involved in the transaction, a third party.
Let’s examine the vaccination of Covid-19 as a positive externality.
Question: Why is the Covid-19 vaccination considered a positive externality?
3. Market supply curve S and private demand curve Dp represent the market for vaccinations. Equilibrium is at point e, and the number of people getting the vaccination is Qe. Society would benefit, however, if more people would get the vaccination. Demand curve DS represents the marginal social benefit (MSB), which includes the private demand for vaccinations plus the external benefits that flow from it. Socially optimal enrollment would be Q1 (point f).
Society would benefit the most by consuming Q1 of the vaccination. As a result, the government needs to enact public policy to get the quantity in the vaccination market to Q1.
What policy/policies can the government enact to get the Covid-19 vaccination to quantity Q1? Check all that apply.
A. Tax the consumer, who is buying the vaccination
B. Provide a subsidy for the vaccination
C. Impose a regulation, requiring the people of the nation to get the vaccination
D. Tax the producer, who is selling the vaccination
E. Government produces and operates vaccination centers, where vaccines are provided at no charge.
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