Flu Shots Provide a Positive Externality

Flu shots provide a positive externality. Suppose that the market for vaccinations is perfectly competitive. Without government intervention in the vaccination market, which of the following statements is correct?

A) At the current output level, the marginal social cost exceeds the marginal private cost.
B) The current output level is inefficiently high.
C) A per-shot tax could turn an inefficient situation into an efficient one.
D) At the current output level, the marginal social benefit exceeds the marginal private benefit.

Correct Answer:

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