(a) Compare the total expenditures in panels A and B. Which set of expenditures is larger? What determines which will be larger? Why? (b) Compare the total expenditures in panels B and C. Which set of expenditures is larger? In which are resource costs larger? Why? (c) If the demand curves truly reflect consumer preferences, which of the three panels is economically efficient? Show the economic losses and the transfers for those panels that are not economically efficient.
(a) Compare the total expenditures in panels A and B. Which set of expenditures is larger? What determines which will be larger? Why? (b) Compare the total expenditures in panels B and C. Which set of expenditures is larger? In which are resource costs larger? Why? (c) If the demand curves truly reflect consumer preferences, which of the three panels is economically efficient? Show the economic losses and the transfers for those panels that are not economically efficient.
MATLAB: An Introduction with Applications
6th Edition
ISBN:9781119256830
Author:Amos Gilat
Publisher:Amos Gilat
Chapter1: Starting With Matlab
Section: Chapter Questions
Problem 1P
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Question 6: Figure 21.3 shows various types of national health insurance systems. (a) Compare the total expenditures in panels A and B. Which set of expenditures is larger? What determines which will be larger? Why? (b) Compare the total expenditures in panels B and C. Which set of expenditures is larger? In which are resource costs larger? Why? (c) If the demand curves truly reflect consumer preferences, which of the three panels is economically efficient? Show the economic losses and the transfers for those panels that are not economically efficient.
Transcribed Image Text:**Figure 21.3: Health Expenditures by Market Structure**
This figure illustrates the different market structures and their impact on health expenditures. The graphs compare competitive, monopolistic, and monopsonistic market structures.
**A. Competitive Market:**
- **Axes:** The vertical axis represents price, and the horizontal axis represents quantity.
- **Curves:** The demand (D) and supply (S) curves intersect at equilibrium, determining the equilibrium price (P*) and quantity (Q*).
- **Area:** The shaded area under the equilibrium is labeled "Expenditures = Resource costs," indicating that in competitive markets, expenditures equal the costs of resources used.
**B. Monopolistic Market:**
- **Axes:** Similar to the competitive market, with price on the vertical axis and quantity on the horizontal.
- **Curves:** Demand (D), marginal revenue (MR), and supply (S) curves are present.
- **Price and Quantity:** The monopolistic price (Pb) is higher, and quantity (Qb) is lower than in a competitive market (Q*).
- **Areas:**
- "Rents" represent excess profits due to market power.
- "Resource costs" are shaded, indicating actual costs incurred.
**C. Monopsonistic Market:**
- **Axes:** Same as the previous two graphs.
- **Curves:** Demand (D), marginal cost (MC), and supply (S) curves are shown.
- **Price and Quantity:** The monopsonistic price (Pc) is lower, and quantity (Qc) is reduced compared to a competitive market (Q*).
- **Area:** The area indicating "Expenditures < Resource costs" suggests reduced spending on resources.
**Additional Notes:**
- Bold outlines in each graph refer to total expenditures associated with each market structure.
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