Question

People experiencing a medical emergency experience better outcomes if someone near them has first aid training and can immediately begin providing assistance. As a result, first aid training and certification is required for jobs working with the elderly and with children. First aid training also benefits the trained person's friends and family. It even benefits strangers who live in the same community since it increases the chances that there is someone near them with first aid training when a medical emergency occurs. a. Illustrate the hypothetical market for first aid training by placing the labels for each curve (supply, marginal private benefit, marginal social benefit) on the graph. b. Next, place point A on the equilibrium outcome and place point B on the socially optimal outcome. Market for First-Aid Training Marginal social benefit B • Marginal private benefit • Supply Price of certification Number of certifications tve fewer c. The market for first aid training involves a negative externality for society, therefore get first aid training than the socially optimal level without intervention in the market. pe

Answer 1

In the market for first aid training, the marginal social benefit curve is higher than the marginal private benefit curve due to positive externalities, resulting in a market quantity less than the socially optimal level. Point A denotes market equilibrium, while Point B represents the socially optimal outcome. Government intervention through subsidies can help achieve the socially optimal quantity of first aid training.

Step-by-step explanation:

In the hypothetical market for first aid training, which has a positive externality, the marginal social benefit (MSB) curve would be positioned above the marginal private benefit (MPB) curve, reflecting the additional benefits to community and society that are not captured by the private market. This situation leads to a market outcome where the quantity of first aid training provided (and consequently certified individuals) is less than the socially optimal level because the market fails to account for the benefits to others.

Point A, representing the market equilibrium, should be placed where the supply curve and MPB curve intersect. Point B, representing the socially optimal outcome, should be placed where the supply curve and MSB curve intersect. The market for first aid training does not involve a negative externality, as stated in the question; it actually involves a positive externality because the presence of trained individuals provides benefits to the broader community that the market doesn't account for.

To move from point A to point B, the government can intervene by providing subsidies or promoting policies that encourage more individuals to obtain first aid training, thus achieving an outcome closer to the socially optimal level of first aid certification.