Question: Consider the market from Question 1. a. Could this extemality problem be solved with: (l) a Pigouvian tax, (2) aPigouvian subsidy, or (3) neither? b.

Consider the market from Question 1.

a. Could this extemality problem be solved with: (l) a Pigouvian tax, (2) aPigouvian subsidy, or (3) neither?

b. If you selected (1) or (2) in part

a, solve for the optimal Pigouvian policy.

Vaccinating for contagious diseases provides a positive extemality, since it reduces the chance that someone else will get sick. If inverse demand and supply are P = 300 — 2QD and P = 30 + Q5, but each vaccine provides 30 value toother people, then calculate the market and efficient quantities, and the optimal Pigouvian subsidy.

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