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.

a. What type of externality (negative or positive) arises from getting a flu shot?

b. On the graph that follows, show the effects of this externality by drawing in and labeling any additional curves that are needed and by labeling the efficient quantity and the efficient price of flu shots. Label the area representing deadweight loss in this market.

Transcribed Image Text:

Price of a flu shot S= marginal social cost PMarket D= marginal private benefit QMarket Quantity of flu shots