Micro Economics Help(Health Care Trade offs)

A major trade-off found in health care is that:

a. It reduces unemployment, but increases consumption
b. The marginal benefit of health care is less than its marginal cost
c. Medical technology often improves it, but it adds to the cost
d. The supply of health care is greater than the demand for health care

I say, C

but online says B

reason it can't be B for me is because marginal benefit and marginal cost has nothing to do with health care trade off

C would be a trade off better tech but your getting higher price

 

I think the point the prof (or whoever) is trying to make, is that health care is heavily subsidized. And when something is subsidized, you get an equilibrium where marginal benefit is less than marginal cost. (Just like when you tax something, you get an equilibrium where marginal benefit is greater than marginal cost.) It seems to me, improvements in technology don't always increase the cost (and often times decrease costs, even if not initially). I totally agree with you that the question is poorly worded, and the question/answers is/are confusing.

 
econ:
I think the point the prof (or whoever) is trying to make, is that health care is heavily subsidized. And when something is subsidized, you get an equilibrium where marginal benefit is less than marginal cost. (Just like when you tax something, you get an equilibrium where marginal benefit is greater than marginal cost.)

This.

The medicare / medicaid programs result in equilibriums in which MB is significantly lower than MC. Especially when you take into account the fact that old people (the ones that utilize Medicare / Medicaid) get proportionally less Benefit from healthcare because they are old and are only alive for a relatively few number of years after the medical treatment they get.

But yeah, the question is definitely poorly worded and difficult to understand.

 
Notarizer:
Couldn't it also be referring to externalities?

That's what I thought at first, but the kind of health care externalities people usually refer to would have marginal benefit greater than marginal cost. So, for example, if I'm sick and choose to get it taken care of, then I'm less likely to get you sick. However, in equilibrium, I don't take this into account because I don't get any benefit from decreasing your chance of getting sick.

 

This question blows...I agree with econ on the mb vs mc argument but I don't know if it can be applied broadly like this example. For example, the marginal benefit of getting my scratched finger looked at, cleaned, and bandaged is significantly different than the marginal benefit of getting a 12 gauge blast to the face fixed up. Obviously the cost of the first is far less than the cost of the second but the marginal benefit of the second is that I (might) get to live which, to me, is a near infinite amount of benefit...tell your professor to write better questions

If I had asked people what they wanted, they would have said faster horses - Henry Ford
 

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