Economics: consumer and cost of health

Question: Economics: consumer and cost of health

Health insurance acts as a buffer between the consumer and cost of health care goods and services. Goods and services cost the consumer less than the charged price because of the presence of health insurance. Because a consumer does not pay the full cost of a good, the consumer may purchase more than goods than he would otherwise purchase without insurance. Providers act as patient’s agent and act in patient’s best interest. Providers may have a financial incentive to act or refrain from acting in a certain way due to insurance arrangements or the lack of insurance. Supplier-induced demand is the provider version of moral hazard. Providers create a demand beyond the amount the well-informed consumer would have chosen. How do we create an alignment of incentives that creates the best possible outcomes for the provider, supplier and the patient?



1. Both Smith and Ricardo believed that, in a competitive market, product prices reflect:

the cost of labor necessary to produce the products.the total costs of all inputs into the products.the effects of trade rather than the costs of inputs.the policies of government toward trade.2.

Adam Smith said that trade freely transacted between countries:

is dangerous because there are no controls on what is exported and what is imported.

generally leads to gains for all countries, so international trade is a positive-sum activity.only benefits a country if that country has an absolute advantage in all products.only benefits a country if that country has a comparative advantage in a specific product.
3. Profiting by buying a product at a specified price in one market and then selling that product in a different market for a higher price is:
illegal in many markets. arbitrage. bartering. common and an easy way to make a profit.


I’m in an energy economics course and need help with a homework question.

The question reads:

In a perfectly competitive market for coal, consumers’ benefit function from consuming tons of coal Q, is given by:

B(Q)=-0.25(Q^2)+ 240Q

In addition, the coal producer has a function given by:


Suppose the government imposes an ad valorem tax on coal producers of 7% of the sale price.

a. What is the competititive equilibrium in the absence of the tax?

b. What is the competitive equilibrium with the ad valorem tax?

c. What is the change in consumer surplus as a result of the tax?

d. What is the change in producer surplus as a result of tax?

e. How much revenue is generated by the tax?

f. What is the deadweight loss from the tax?

g. What is the change in total welfare due to the tax?


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