Using the concepts in Chapter 7’s discussion of consumer behavior, explain how health care
Using the concepts in Chapter 7’s discussion of consumer behavior, explain how health care insurance results in an over allocation of resources to the health care industry. Use a demand and supply diagram to specify the resulting efficiency loss.
11. How is the moral hazard problem relevant to the health care market?
12. What is the rationale for exempting a firm’s contribution to its workers’ health insurance from taxation as worker income? What is the impact of this exemption on allocative efficiency in the health care industry?