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Chapter 5: Q 20 (page 122)

Based on your answer to Question 5-19, if the government aims to correct the positive externality in the inoculation market via a per-unit subsidy to consumers, in the wake of the study, is the appropriate per-unit subsidy higher or lower than before?

Short Answer

Expert verified

The per-unit subsidy is higher than before.

Step by step solution

Step 1. Given Information.

The graph for influenza is,

Step 2. Per-unit subsidy

The per-unit subsidy is higher than before because the government aims to inoculate positive externality and to do that the per-unit subsidy should be greater as that would attract the consumers of taking vaccines.

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