Malaria is a contagious disease spread by mosquitoes. Mosquitoes bite an infected person and pass the disease along by biting an uninfected person. In developing nations, the spread of malaria can be diminished if people sleep underneath mosquito nets draped over beds. The accompanying graph shows the market supply and demand for mosquito nets.
Part 1: Use the copy tool to draw a curve showing the marginal social benefit (MSB) from the use of mosquito nets.
Part 2: Use a vertical drop line to identify the socially optimal quantity, and label it Qopt. Make sure that the highest point of the drop line for Qopt is placed on the supply curve.
Suppose a Pigouvian subsidy is used to completely internalize the external benefit.
Part 3: Use a horizontal drop line to identify the price that suppliers would receive after the subsidy. Label it Ps.
Part 4: Use a horizontal drop line to identify the price that consumers would pay after the subsidy. Label it Pc.