Question

3. The following function shows the market for influenza vaccine.

TSC = 2Q², so MSC = 4Q,

MSB = 100 – 6Q,

where Q is the quantity of influenza vaccines.

• Find the market efficient quantity of influenza vaccines and the price of the vaccine.
• Is it socially beneficial to produce influenza vaccine at the efficient quantity?

Answer 1

The free market equilibrium is where the marginal social cost equals the marginal social benefit in case of a public good like influenza vaccine.

so, MSC = MSB

or, 4Q = 100-6Q

or, 8Q = 100

or, Q = 12.5 units

and P = MSC = 4Q = 4(12.5) = 50

Yes, it is socially beneficial to produce influenza vaccine at the efficient quantity.

as, socially efficient condition also is that MSC=MSB

We say social efficiency occurs at an output where Marginal Social Benefit (MSB) = Marginal Social Cost (MSC)