Asked by Nikki Congdon on Jun 14, 2024
Verified
Assume that health insurance pays three-fourths of the cost of health care. Under this type of system, there will be allocative
A) efficiency because consumers pay a price below market equilibrium and receive a quantity at which the marginal cost to society equals the marginal benefit.
B) efficiency because consumers pay a price below market equilibrium and receive a quantity at which the marginal benefit to society exceeds the marginal cost.
C) inefficiency because consumers pay a price below market equilibrium and receive a quantity at which the marginal cost to society exceeds the marginal benefit.
D) inefficiency because consumers pay a price above market equilibrium and receive a quantity at which the marginal benefit to society exceeds the marginal cost.
Allocative Inefficiency
A situation where resources are not distributed optimally, resulting in lost potential for producing welfare or value.
Marginal Cost
The cost incurred by producing one more unit of a good or service.
Marginal Benefit
The added utility or joy gained by consuming an extra unit of a product or service.
- Determine the factors leading to the widespread use of health care in the United States.
Verified Answer
WB
Wendy BobadillaJun 20, 2024
Final Answer :
C
Explanation :
When health insurance pays a large portion of health care costs, consumers face a lower out-of-pocket price, leading them to consume more health care than they would if they were paying the full cost. This results in a situation where the quantity of health care consumed is at a point where the marginal cost to society of providing that additional unit of health care exceeds the marginal benefit derived from it, leading to allocative inefficiency.
Learning Objectives
- Determine the factors leading to the widespread use of health care in the United States.
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