Question 1

The two welfare effects of insurance are

Accepted Answer

Insurance provides a welfare gain by reducing risk through risk pooling, but it can also lead to a welfare loss if individuals consume more healthcare than necessary when insured, due to moral hazard.

Question 2

The three types of distributional equity are:

Accepted Answer

Vertical equity refers to the principle that people with different levels of income or ability should be treated differently. Horizontal equity means that people with similar income or ability should be treated equally. Intergenerational equity involves fairness between different generations.

Question 3

To achieve this type of efficient, demand must be at an appropriate level, the supply of services must be adequate, the level of quality must be appropriate, and produced at a low cost.

Accepted Answer

Economic efficiency involves producing goods and services at the lowest cost while meeting demand and maintaining quality, aligning with the conditions described.

Question 4

An externality occurs when a third party is affected by the two parties directly involved in a transaction or exchange but does not have a direct way of impacting the outcome of the

Accepted Answer

An externality is a consequence of an economic activity experienced by unrelated third parties; it can be positive or negative and occurs without the third party's direct involvement in the transaction.

Question 5

Diminishing marginal value means the more of any good or service the individual has, the less successive units of the good or service will be worth to them..

Accepted Answer

Diminishing marginal value refers to the decrease in the additional satisfaction or utility that a person derives from consuming each additional unit of a good or service.

Question 6

Allocative efficiency implies that, given production conditions and input prices, the lowest cost combination of inputs is used at any output level.

Accepted Answer

Allocative efficiency refers to the optimal distribution of resources to produce the combination of goods and services most desired by society, not necessarily the lowest cost combination of inputs.

Question 7

Marginal cost is the amount that would have to be paid to the resources to induce them not to produce something else of value to consumers.

Accepted Answer

Marginal cost is the additional cost of producing one more unit of output. It includes the cost of the resources used to produce the additional unit, such as labor, materials, and energy.

Question 8

If marginal cost is greater than the marginal social value, then output should be increased.

Accepted Answer

If marginal cost is greater than the marginal social value, it indicates that the cost of producing an additional unit exceeds the benefit it provides to society, suggesting that output should be decreased, not increased.

Question 9

Social value is made up of all individuals' external values for a specific good or service.

Accepted Answer

Social value encompasses the broader impact of a good or service on society, including social, environmental, and economic factors, not just individual external values.

Question 10

Free ride refers to a donor gaining benefits from others' donations while giving less.

Accepted Answer

The term "free ride" describes a situation where an individual benefits from resources, goods, or services without paying for the cost of the benefit, often relying on others to contribute.

Question 11

The extra-welfarist position is concerned with how health is distributed among all members of society.

Accepted Answer

The extra-welfarist position is concerned with how health is distributed among all members of society, not just with how it affects the overall well-being of society.

Question 12

Will a freely competitive market without philanthropy yield a socially optimal output when there are consumption externalities? Discuss your answer.

Accepted Answer

The answer of Will a freely competitive market without philanthropy...

Question 13

List and discuss five goals of health policy.

Accepted Answer

The answer of List and discuss five goals of health...

Question 14

What is necessary for moral hazard to occur and what are its implications?

Accepted Answer

The answer of What is necessary for moral hazard to...

Quiz 13: Value Judgements and Economic Evaluation