Final answer:
Governments can use subsidies, like vouchers for vaccinations, to make the market output more socially optimal by ensuring the external benefits of vaccinations are accounted for in the market price.
Step-by-step explanation:
To align the market level of output with the socially desirable level of output, governments can implement subsidies such as vouchers for vaccinations. Providing a subsidy to consumers acts as additional income that can only be used for a specific purpose—in this case, to obtain a flu shot. When the value of the voucher corresponds to the per-unit external benefit (spillover benefit) of the vaccination, it can lead to a new market equilibrium.
This equilibrium, denoted as Qsocial, is where the market quantity aligns with the socially optimal quantity, and the Price at Psocial, where the Marginal Social Benefit (MSB) equals the Marginal Social Cost (MSC). At this point, the supply and demand of flu shots are optimized to maximize societal welfare. Suppliers are compensated at the socially-optimal price, whereas consumers use the voucher to cover the cost, paying only the subsidized price, Psubsidy. Such a policy ensures the provision of flu shots at a level that includes the value of the positive externalities, thus achieving social efficiency.