Positive Externalities and ConsumptionConsumption of flu shots generates external benefits, so the marginal social benefit curve, MSB, of flu shots, corresponds to the demand curve, D, shifted upward by the marginal external benefit. Panel (a) shows that without government action, the market produces QMKT. The market quantity is lower than the socially optimal quantity of consumption, QOPT, at which MSB crosses the supply curve, S. At QMKT, the marginal social benefit of another flu shot, PMSB, is greater than the marginal private benefit to consumers of another flu shot, PMKT. The yellow deadweight loss area represents the lost opportunities for net gains that could be achieved by producing QOPT rather than QMKT. Panel (b) shows how an optimal Pigouvian subsidy to consumers, equal to the marginal external benefit, moves consumption to QOPT by lowering the price paid by consumers to PCNS and raising the price received by producers to POPT.