Consider a hypothetical market for the hepatitis A vaccine. The market demand (or private marginal benefit schedule) is given as: P = 80 - 0.25Q^d where Q^d denotes the number of vaccinations demanded per month and P is the price per vaccination. The market supply for the vaccine (the private marginal cost schedule) is: P = 15 + 0.4Q^s where Q^s denotes the number of vaccinations supplied per month.
a. Sketch a graph of the market and solve for the number of vaccinations purchased per month.
b. The hepatitis A vaccination generates external benefits. Suppose the external marginal benefit schedule is given as: MEB = 35 - 0.15Q. Find the efficient number of vaccinations per month.
c. Suppose the government decides to subsidize the price of the hepatitis vaccination. Find the optimal subsidy. Who gains and loses under this plan?