Question

the figure below shows the market for rabies shots for pets. the market demand curve for rabies shots reflects only the marginal private benefit (mpb) that owners of vaccinated pets receive from having their pets vaccinated. since this is a market with positive externalities, suppose the government provides a subsidy to pet owners that is equal to the marginal social benefit (msb) minus the marginal private benefit (mpb), in this case, $1.00 per rabies shot. with the subsidy, the demand curve will shift and become the same as the marginal social benefit (msb) curve.
move the demand curve below to illustrate this shift. be sure to take the exact size of the subsidy into account. precise answers are required.
provide your answer below:

Explanation:

Step1: Understand the effect of subsidy

A subsidy of $1.00 per rabies shot is given. Since the demand curve based on marginal private benefit (MPB) needs to shift to become the marginal social benefit (MSB) curve.

Step2: Determine the shift

The original demand curve (MPB) has a vertical intercept at $4$. With a subsidy of $1.00, the new demand curve (MSB) should have a vertical intercept at $4 + 1=5$.

Answer:

Shift the demand curve (D (MPB)) upwards such that its new vertical - intercept is at $5$ (while keeping the slope the same as the original demand curve).