shots, an effective policy might be to provide a subsidy to those who choose to get vaccinated.

Figure 13.3 shows the market for flu shots. The market demand curve DMarket for flu shots reflects only the
marginal private benefits (MPB) that the vaccinated individuals receive from the shots. Assuming that there

are no spillover costs in the production of flu shots, the market supply curve is given by the marginal private
312 13 • Positive Externalities and Public Goods

cost (MPC) of producing the vaccinations.

The equilibrium quantity of flu shots produced in the market, where MPB is equal to MPC, is QMarket and the
price of flu shots is PMarket. However, spillover benefits exist in this market because others, those who chose not
to purchase a flu shot, receive a positive externality in the form of a reduced chance of contracting the flu.
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