Question 3: The figure below shows the market for polio vaccination in Africa. P

Question

Question 3: The figure below shows the market for polio vaccination in Africa. Polio vaccination confers an external benefit because one person's vaccination makes it less likely that other people will catch polio. If the market is competitive and left unregulated, how many doses of vaccine will be administered? What is the cost of unregulated vaccine administration? If the Melinda and Bill Gates Foundation underwrites the cost of the vaccine by paying for a large fraction of the preparation and delivery cost, what will happen to the number of doses administered Fri rd cort (dollars per contre 60t 40 20 20 40 60 00l00 Qunntity tmorrbly contract)? Why?

Explanation / Answer

If market is competitive and unregulated then the condition to find optimal number of vaccine as per market will be MC = MB. It will yield 40 units of vaccination.

Cost of unregulated vaccine is $60 per unit.

If the Gates foundation underwrites the cost then it will push the market towards socially efficient units of vaccination which in this case will be 60 units.

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