Use a supply and demand diagram to show how health insurance causes an over allocation of resources to health care
Without insurance the market moves to Point A. The equilibrium price is Pa and quantity is Qa. When the health insurance is purchased by an individual demand increases. There is a wedge between the price consumers pay and the price sellers receive. The sellers receive a price of Pb and consumers pay Pc. The difference is paid by the insurance company. The insurance leads to an over allocation of resources, the quantity moves from the efficient point Qa to Qc.
You might also like to view...
If the government replaces a lump sum tax with a proportional labor income tax, then
A) employment and output increase. B) employment increases and output decreases. C) employment decreases and output increases. D) employment and output decrease.
What is an ascending-value auction?
Which of the following is not part of U.S. GDP?
a. the value of a Toyota imported from Japan b. the value of a Ford Mustang produced in the United States and sold in Canada c. the salary of the governor of Minnesota d. the value of a Rhode Island attorney's services
The poverty line is
A. never raised or lowered. B. raised or lowered every few years. C. raised every year. D. lowered every year.