Use the concept of supply and demand to explain why an increase in Medicare subsidies can lead to an increase in health care spending by the government
What will be an ideal response?
Medicare reduces the price that the elderly people have to pay for health services, so that an increase in the subsidy will lead to an increase in the quantity demanded of health services. As a result, the government ends up paying more in total health care spending.
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Profits and losses are true signals because they
A) convey information about true long-run profits. B) cannot be misinterpreted by entrepreneurs. C) convey information about where to place resources and reward people who act on the information. D) reward people who make profits with even more profits and punish those who make losses with even more losses.
The opportunity cost of an action is
a. objective and will be the same for all individuals. b. a measure of the undesirable aspects involved in the action. c. applicable only to choices involving material goods like commodities. d. the highest valued alternative forgone as the result of choosing an option.