16 Eradication of a disease with a vaccine subsidy. A terrible disease called fictitia is ravaging the woebegone nation of Pcoria. Fortunately, government scientists have just discovered the formula for an effective vaccine. Given current raw material prices, it costs $10 to produce each dose of vaccine. Assume that Pcoria has 100 citizens, and that the demand for vaccine in the first time period is Q=100 – where P is vaccine price and y is disease prevalence. a Assume a competitive vaccine manufacturing market and a disease prevalence of 20% (y =0.2). How many citizens demand the vaccine this period? b After this initial round of vaccinations, demand for the vaccine plummets because many citizens have been vaccinated and do not need another vaccine. Among the unvaccinated population, demand is now %3D Q=50 – The fictitia outbreak has slowed down considerably but the prevalence is still ris- ing. Now assume y =0.25. How many unvaccinated citizens will demand vaccine this period? c The demand for vaccine in the third period Q= 40 – P/y. Because of the suc- cess of the vaccination campaign, disease prevalence is now 10%. How many unvaccinated citizens demand vaccine this period?

Suppose we allocate a fixed budget for tuberculosis screening between two alternatives: screening the population generally, which has a marginal cost per test of MCG and a marginal benefit of MBG additional cases detected per test, and screening in homeless shelters, with a corresponding MCS and MBS. Assume it is currently true that MBG/MCG < MBS/MCS. Understanding that MB decreases (increases) as quantity increases (decreases) and the reverse is true for MC, we can conclude that: a. too much screening is being done at homeless shelters relative to general screening. b. too much general screening is being done relative to screening at homeless shelters. c. the price of screening in homeless shelters is too high. d. the allocation is already optimal if there is a fixed budget because we can’t equate the ratios of marginal benefit and marginal cost. e. we can only make the allocation optimal if the prices can be changed

Based on the data presented in the table below estimate elasticity of demand for two price changes:  a) price increase from $3 to $9 per hour; and b) price decrease from $9 to $3 per hour. Make sure to use the midpoint formula. Price Per Hour of Therapy Demand for Therapy 0 16 1 15 2 14 3 13 4 12 5 11 6 10 7 9 8 8 9 7 10 6 11 5 12 4 13 3 14 2 15 1 16 0

Indicate whether the statement is true or false, and justify your answer.Most economists believe that the smallpox eradication campaign was not costeffective because it required so many upfront costs and smallpox was already eliminated in much of the developed world.

Private plans were able to reduce overall drug expenditures to an extent due to: the ability of private plans to drive the use of less expensive therapeutic substitutes a decrease in prices by pharmaceutical companies an increase in prices by pharmaceutical companies the ability of Medicare Part D plans to drive the use of drugs toward less expensive therapeutic substitutes

12 Demand elasticity and social loss. Consider two vaccines for difffferent viruses χ and Ω Assume that the marginal cost of producing both drugs is constant and that the fixed cost is small. In other words, assume that the supply curve for both drugs is flat.  a Suppose that demand for vaccine χ is price elastic, whereas demand for vaccine Ω is relatively inelastic. Plot the private demand curve for both drugs on separate axes. b For the sake of example, assume that both viruses have the same externality. Plot the social demand curve for both drugs and label the social loss in each case. c Explain intuitively why, all else equal, social loss is greater in the case of elastic demand than it is in the case of inelastic demand.

Gaining access to complementary technology is an advantage of licensing IPR. True False

It is difficult to argue against the scientific merit of medical discoveries such as treatments for cancer or AIDS. Is scientific merit alone sufficient to determine the rational allocation of medical funds in such high-cost cases? What other kinds of information are relevant?

Modify the S-I-R model for an epidemic to take into account vaccinations of people at a constant rate d, assuming that someone vaccinated immediately is no longer susceptible. Find a formula for  dI/dS for the resulting model.

Historically, Vaccinations have prevented the spread of certain diseases such as chicken pox or megningtis. What type of externality takes place with the consumption of such vaccines. Explain with words and a graph.