Key Economic Concepts
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Questions and Answers

What is the key concept related to comparative advantage?

  • The individual or entity with the highest fixed cost.
  • The individual or entity with the lowest opportunity cost. (correct)
  • The individual or entity with the highest opportunity cost.
  • The individual or entity with the lowest fixed cost.
  • What was the dominant type of insurance in the US market in the 1990s?

  • Public insurance
  • Private insurance
  • Managed care (correct)
  • Out-of-pocket insurance
  • What was the primary method of payment for medical expenses in the 1960s?

  • Out-of-pocket payment (correct)
  • Third-party payment
  • Public insurance
  • Private insurance
  • What is the main driver of the rise in healthcare spending?

    <p>Advancements in medical technology and desire for costly healthcare services</p> Signup and view all the answers

    What is the approximate percentage of the rise in healthcare spending attributed to new technologies?

    <p>50%</p> Signup and view all the answers

    Which economic concept describes the value of the next best alternative foregone when making a choice?

    <p>Opportunity Cost</p> Signup and view all the answers

    What economic principle asserts that individuals are driven by personal gain in their economic decisions?

    <p>Self-Interest</p> Signup and view all the answers

    What economic concept involves comparing the additional costs and benefits of a decision?

    <p>Marginal Analysis</p> Signup and view all the answers

    What economic principle suggests that resources are best allocated when production is left to the most efficient producers?

    <p>Competition</p> Signup and view all the answers

    When does a market failure occur?

    <p>When the free market cannot efficiently allocate resources.</p> Signup and view all the answers

    Study Notes

    Key Economic Concepts

    • 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.

    Changes Affecting Healthcare Delivery

    • 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.

    Reasons Behind Rising Healthcare Costs

    • 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.

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    Description

    Explore key economic concepts including scarcity and choice, opportunity cost, marginal analysis, and self-interest. Learn how these principles shape individual decision-making and economic outcomes.

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