Figure 5-3 Figure 5-3 represents the market for medical services with and without insurance,and the effect of a third-party payer system on the demand for medical services.
-Refer to Figure 5-3.The efficient quantity of medical services is

Question

Figure 5-3  Figure 5-3 represents the market for medical services with and without insurance,and the effect of a third-party payer system on the demand for medical services.
-Refer to Figure 5-3.The efficient quantity of medical services is

Quizplus · Accepted Answer

The efficient quantity of medical services is where the marginal cost (MC) of providing medical services intersects with the marginal benefit (MB) received by consumers. In this case, the efficient quantity is where MC = MB, which is at point E. Without insurance, the demand for medical services is represented by the demand curve D1, which intersects with MC at point A. With insurance, the demand curve shifts to D2, which intersects with MC at point B. The quantity demanded with insurance is higher than without insurance because consumers face a lower out-of-pocket cost, which increases their willingness to pay for medical services. However, the quantity demanded with insurance is not efficient because the additional medical services consumed beyond point E result in a cost (MC) that exceeds the benefit (MB). Therefore, the best choice is B) 800, which represents the efficient quantity of medical services.

Figure 5-3 Figure 5-3 Represents the Market for Medical