Key Concepts in Microeconomics

Questions and Answers

The issue of scarcity and choice emerges (correct)

Market failure happens

Marginal analysis is applied

Opportunity cost arises

To seek efficiency in production and consumption (correct)

To promote competition

To maximize social welfare

To achieve market failure

Supply and demand curves

Producer preferences

The invisible hand (correct)

Government regulations

Production is placed in the hands of more efficient producers Signup and view all the answers

Efficiency Signup and view all the answers

The individual or entity with the lowest opportunity cost holds the comparative advantage. Signup and view all the answers

A shift from private to public insurance financing. Signup and view all the answers

Cost-plus pricing system. Signup and view all the answers

Advancements in medical technology. Signup and view all the answers

The introduction of a variety of public and private insurance options. Signup and view all the answers

Study Notes

Scarcity & Choice: Limited availability of resources forces individuals to prioritize economic decisions.
Opportunity Cost: Represents the value of the next best alternative forgone when making a choice, highlighting the trade-off in decision-making.
Marginal Analysis: Evaluates additional costs and benefits of incremental decision changes, focusing on marginal impacts rather than total outcomes.
Self-Interest: Individuals driven by self-interest strive for efficiency in both production and consumption processes.
Markets & Pricing: Utilize the pricing system, known as the invisible hand, to allocate resources effectively based on supply and demand interactions.
Supply & Demand: Establishes equilibrium between consumer willingness to pay and supplier offerings, aiding in the efficient distribution of goods and services.
Competition: Incentivizes resource owners to optimize their resources, enhancing satisfaction for consumers, producers, and investors by promoting efficiency.
Efficiency: Measures how well resource allocation contributes to overall social welfare in economic contexts.
Market Failure: Occurs when free markets fail to allocate resources optimally, resulting in either excess or insufficient output.
Comparative Advantage: Highlights the benefits of voluntary exchange based on opportunity costs, where the entity with the lowest opportunity cost holds the comparative advantage.

Managed Care Dominance: In the 1990s, managed care became the primary insurance model, pushing providers to consider costs more critically.
Public Insurance Shift: Transition from private insurance to public funding, with Medicare and Medicaid causing government spending to rise to nearly 40% within ten years of their introduction.
Prospective Payment System: Introduced in 1983, changing hospital billing from cost-plus pricing to a system based on diagnoses under Medicare regulations.
Third-Party Payment Rise: Shifted the healthcare payment landscape from out-of-pocket expenses to reliant on private and public insurance options since the 1960s.

Advancements in Technology: Significant increases in healthcare spending largely driven by innovations in medical technology, leading to the use of more expensive services.
Specialist Services: Higher costs attributed to specialist consultations, which often involve expensive treatments and diagnostic procedures.
Overall Spending Surge: Approximately half of the increase in healthcare expenditure is linked to new technologies and their applications in treatment and care.