Assessment Task 3Answer any FOUR of the following questions. Each question is worth a total of 12.5 marks. Ifmore than four questions are answered, marks will be awarded for the first four answers only.QUESTION 1At the beginning of the flu season, Australians can purchase flu vaccinations from manydifferent immunisation providers such as pharmacies, doctors’ practices and communityhealth centres. A recent scientific study showed that getting a flu jab reduces both the chanceof getting COVID-19 and COVID-19 symptoms. This welcome news has been widely reportedin the newspapers. Examine the likely consequences in one or two related markets of yourchoice.QUESTION 2Governments generally want people to get immunised against the flu and other diseases suchas COVID-19. Nonetheless many people refuse to take the vaccination jab, because theyoverestimate the likelihood of side effects, because they are complacent about gettinginfected. They also might not care or understand that their immunity protects others. Use thetheories of market failure and government intervention to analyse the motives ofgovernment, the anti-vax phenomenon and their consequences. What, if anything shouldgovernment do to make more people get vaccinated? What would be the problems with suchinterventions?QUESTION 3When COVID-19 stated spreading across the world, the race was on to develop vaccines asquickly as possible. Such research & development has a high fixed cost and can only beundertaken in industries with high market concentration where firms have significantmonopoly power, like the pharmaceutical industry. Examine this industry using the theoryand models of industry structure. Should government be worried about any aspect of how anindustry with this market structure will perform?QUESTION 4Pfizer is one of the world’s largest pharmaceutical companies. Developing its COVID-19vaccine is a costly, uncertain and complex process. This company would need to considerwhich parts of the vertical chain to outsource and which to conduct inhouse. Using the theoryof the optimal boundary of the firm, discuss Pfizer’s make-or-buy decision for developing andproducing its COVID vaccine. What stages of the vertical chain should Pfizer considerconducting inhouse, and which should be outsourced? Provide reasons for your findings.QUESTION 5Consider the following hypothetical case. Only Pfizer and a competitor, Astra-Zeneca, havethe ability to develop a COVID-19 vaccine. Both have access to the same two promisingvaccine technologies, but each company must choose one to invest in. While each firmcould develop a vaccine on its own, the problem is that the fixed cost of production and riskare very high. They are therefore considering coordinating their actions through a strategicalliance where they join forces and share cost and revenue equally. Analyse the interactionbetween the two firms using game theory. Present a payoff matrix to model the situationand analyse it for Nash equilibrium. What can either of these firms do to make their best,most-preferred outcome more likely?
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