Category 1
What is total utility and what is an example of this in healthcare?
total satisfaction received upon consuming each unit of a good or service or activity.
Physical Therapy Sessions in which a patient is recovering from knee surgery. Each session over time provides less and less additional satisfaction, but the total utility continues to rise overall with each session added.
What is and opportunity cost and what is an example of an opportunity cost
The cost of a purchase or action measured in terms of a forgone alternative is.
If a hospital uses its budget to purchase new MRI machines, the opportunity cost is the specialized staff or cancer screenings it can no longer afford.
What is marginal utility and a healthcare example
change in total satisfaction from consuming one additional unit of a good or service and we can see additional visits to the doctor office when starting with the first visit, we see the Law of Diminishing Returns over time where there is change in the rate of satisfaction with each additional doctor's visit.
True or False. An opportunity cost applies only to individuals' spending and earning decisions.
False. Each decision an individual makes, economic or not, carries with it the weight of a left behind alternative, or opportunity cost.
We assume that beyond some point is a decreasing of the rate of additional units of satisfaction. Beyond some point, the additional satisfaction from consuming a good or service goes down. This is an example of:
The Law of Diminishing Marginal Utility
What is an example of an Explicit Cost?
A business acquiring new machinery or paying labor wages
The change in the total cost from consuming each additional unit of a good or service, is the...
Marginal Cost
What is the name for the type of profit that keeps a business stable and in operation?
Normal Profit.
What is public choice theory?
When individuals try to maximize their own well being when voting (making collective choices).
Because there is a fulfilling of the need or a desire achieved from a good or service at a certain point:
Marginal Utility will diminish
True or False. An implicit cost is an opportunity cost?
True.
If you are going running a marathon with your best friend and you have to miss your cousin's graduation day, the satisfaction you would have received from attending your cousin's graduation day is...
an opportunity cost of running in the marathon with your best friend
For a business to maximize it's profits...
Its total revenue must exceed total costs by the greatest amount.
True or False. You can use cost benefit principles to make decisions around ...
how much information to seek before voting and whom to vote for.
One instance where Net Benefit is maximized to you as an individual is...
where the marginal benefit it equal to the marginal cost.
All business most earn enough revenue to cover the explicit and implicit costs. True or False.
True
Is normal profit an implicit cost to a business?
Yes.
Example: Imagine a doctor, Dr. Jeter, who leaves a hospital job paying $200K per year to start her own private clinic.
Explicit Costs: These are out-of-pocket expenses, such as staff salaries, rent for the clinic, and medical supplies.
Implicit Costs: These are opportunity costs, the cost of resources already owned or foregone.
Foregone Salary: The $200k Dr. Jeter could have made working for the hospital is a massive implicit cost of starting her own business.
Investment Capital: If she used $100k of her savings for example to buy equipment instead of investing it, the lost interest is also an implicit cost.
Think of a negative externality in healthcare...
One negative externality in healthcare is smoking, which creates secondhand smoke affecting bystanders and increases public health costs for society.
A negative externality causes persons who are not involved in an action to experience lower costs or prices because the action was performed. True or False.
False. Because it is not about whether costs are higher or lower, it's about whether there was harm.
If you attend an event, the marginal cost you add up over time increases the longer you are at the event because...
each hour your are at the event comes at the expenses of you giving up more and more important alternative activities.
How do we measure the social cost of an action?
We know it's equal to its private costs plus any negative externalities it creates.
Why would a completely rational person choose to remain ignorant about the news and politics and voting?
A rational person may choose to remain ignorant of news and politics due to rational ignorance, where the high cost of becoming informed, their time and energy, outweighs the small benefit of their single vote influencing political outcomes. This behavior is seen as a logical decision to conserve mental resources for a personal life, rather than wasting them being fully informed on foreign policy for example, when they have bills and children to take care of.
When something I do affects the well-being of persons or things that are not involved in my action...this is an example of a:
This is an externality.
Public Choice Theory explains that the members of special interest groups actively promote their position through ad campaigns and campaign contributions because of the benefits they expect to receive. True or false.
True.
Total revenue is...
Revenue, money received, from the total amount of goods and services sold.