Question

every year at the beginning of flu season, many people, including the elderly, get a flu shot to reduce their chances of contracting the flu. one result is that people who do not get a flu shot are less likely to contract the flu. getting a flu shot results in a externality. with the externality, a. the marginal social benefit curve is below the marginal private benefit curve b. the marginal social benefit curve is above the marginal private benefit curve c. the marginal social cost curve is above the marginal private cost curve d. the marginal social cost curve is below the marginal private cost curve. the optimal market quantity is that quantity whens the a. marginal social benefit curve intersects the marginal private benefit curve b. marginal social benefit curve intersects the marginal private cost curve c. marginal private benefit curve intersects the marginal private cost curve d. marginal private benefit curve intersects the marginal social cost curve.

Explanation:

When people get flu - shots, it benefits not only themselves (private benefit) but also reduces the likelihood of others getting the flu (social benefit). This is a positive externality. For positive externalities, the marginal social benefit (MSB) is the sum of the marginal private benefit (MPB) and the marginal external benefit. So, MSB > MPB, and the marginal social benefit curve is above the marginal private benefit curve. The optimal market quantity in the presence of a positive externality occurs where the marginal social benefit curve intersects the marginal private cost curve. This is because we want to account for the full benefit to society when determining the optimal quantity.

Answer:

1. Positive
2. B. the marginal social benefit curve is above the marginal private benefit curve
3. B. marginal social benefit curve intersects the marginal private cost curve