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ClassOf1_Vaccinat_consumption5

ClassOf1_Vaccinat_consumption5

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Explanation of why vaccines have positive consumption externality and how. Definition of marginal external benefit related to vaccines’ market. Illustration of the first free market, socially optimal quantities in a supply and demand diagram given the MEB and assuming an upward sloping MPC curve and a downward sloping MPB curve. Explanation of effect of tax or subsidy and definition of internalize the externality.
Explanation of why vaccines have positive consumption externality and how. Definition of marginal external benefit related to vaccines’ market. Illustration of the first free market, socially optimal quantities in a supply and demand diagram given the MEB and assuming an upward sloping MPC curve and a downward sloping MPB curve. Explanation of effect of tax or subsidy and definition of internalize the externality.

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Published by: ClassOf1.com on Sep 14, 2009
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05/11/2014

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ClassOf1provides exert guidance for College, Graduate and High schoolhomework and liveonline  tutoring on subjects likeFinance, Marketing,Statistics,Economicsand others. Check out more solved   problems in our Solution Library .
 
Sub: Economics Topic: Micro Economics
Question:
Explanation of why vaccines have positive consumptionexternality and how. Definition of marginal externalbenefit related to vaccines’ market. Illustration of thefirst free market, socially optimal quantities in a supplyand demand diagram given the MEB and assuming anupward sloping MPC curve and a downward sloping MPBcurve. Explanation of effect of tax or subsidy anddefinition of internalize the externality.
 Think about the market for vaccines, which we described in class as having apositive consumption externality.Define in general the term "internalize the externality" and explain itsapplication in this case. Discuss a policy other than a tax or subsidy thatcould cause individuals to internalize the externality. Explain briefly.
Solution:
 
Define in general the term "internalize the externality" and explain itsapplication in this case. Discuss a policy other than a tax or subsidy thatcould cause individuals to internalize the externality. Explain briefly.
Internalizing the externality represents
altering incentives so thatpeople take account of the external effects of their actions.
Externalitiescan be internalized
through market mechanism, government regulation, orself-governing institutions or a mix of these institutions
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 The Homework solutions from ClassOf1 are intended to help the student understand the approach to solving the problem and not forsubmitting the same inlieu of your academic submissions for grades.

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