Question

chicken - pox vaccinations for toddlers benefit society by protecting young children and by preventing an epidemic. the marginal social benefits of chicken - pox vaccinations exceed the marginal private benefit for any quantity of vaccinations. refer to figure 5 - 10. one way to obtain the economically efficient amount of chicken - pox vaccinations is for government to internalize the externality. what is the size of the per - vaccination pigovian subsidy that the government must provide?
o ( p_1 - p_3 )
o ( p_1 )
o ( p_2 - p_3 )
o ( p_2 - p_1 )

Explanation:

In economics, when there are positive externalities like with chicken - pox vaccinations (where marginal social benefits exceed marginal private benefits), the government can use a Pigovian subsidy to internalize the externality and reach the economically efficient outcome. The size of the per - unit Pigovian subsidy is equal to the vertical distance between the marginal social benefit and the marginal private benefit curves at the efficient quantity. From the graph and economic theory, this distance is represented by the difference between the price at the efficient quantity on the marginal social benefit curve ($P_2$) and the price at the efficient quantity on the marginal private benefit curve ($P_1$), which is $P_2 - P_1$.

Answer:

$P_2 - P_1$