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"Dr. Arata Kochi, the World Health Organisation malaria chief,... [says that] eradication is counterproductive. With enough money, he said, current tools like nets, medicines and DDT could drive down malaria cases 90 percent. 'But eliminating the last 10 percent is a tremendous task and very expensive,' Dr. Kochi said. 'Even places like South Africa should think twice before taking this path.'"
a. Is Dr. Kochi talking about production efficiency or allocative efficiency or both?
b. Make a graph with the percentage of malaria cases eliminated on the x-axis and the marginal cost and marginal benefit of driving down malaria cases on the y-axis. On your graph:
(i) Draw a marginal cost curve that is consistent with Dr. Kochi's opinion reported in the news clip.
(ii) Draw a marginal benefit curve that is consistent with Dr. Kochi's opinion reported in the news clip.
(iii) Identify the quantity of malaria eradicated that achieves allocative efficiency.
Where minimum efficient scale is very huge for capital intensive operations, it may be more cost effective to allow one company to spread its fixed costs over a very huge number of
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