Economic Efficiency, Taxes, and Healthcare

A set of flashcards encompassing key concepts and vocabulary related to economic efficiency, taxes, healthcare, and market interventions.

Consumer Surplus

The difference between the highest price a consumer is willing to pay for a good or service and the actual price the consumer pays.

Producer Surplus

The difference between the lowest price a firm would be willing to accept for a good or service and the price it actually receives.

Deadweight Loss

Reduction in economic surplus resulting from a market not being in competitive equilibrium.

Price Floor

A government intervention requiring that the price be above equilibrium to aid suppliers.

Price Ceiling

A government intervention requiring that the price be below equilibrium to aid buyers.

Externality

A cost or benefit caused by an economic transaction that is borne by a third party, not directly involved in the transaction.

Asymmetric Information

A situation where one party in a transaction has more information than the other party.

Adverse Selection

A scenario where one party in a transaction has more information about the quality of a good than the other party.

Moral Hazard

The risk that an insured party may take on risky behavior because they do not bear the full consequences of that behavior.

The Coase Theorem

The idea that private parties can negotiate without cost over the allocation of resources to resolve externalities, provided transaction costs are low.

Tragedy of the Commons

The phenomenon where individuals act in their own self-interest regarding a shared resource, leading to its depletion.

Health Insurance

A contract under which a buyer agrees to make payments in exchange for the provider agreeing to pay some or all of the buyer's medical bills.

Universal Health Insurance

A system where all residents are required to enroll in a health insurance program, either government-operated or nonprofit.

Fee-for-Service

A health care payment model where doctors and hospitals receive a payment for each service they provide.

Single Payer Healthcare System

A system where the government provides national health insurance for all residents.

Affordable Care Act (ACA)

A US law aimed at making health insurance more affordable, increasing accessibility and coverage.

What is adverse selection?

Adverse selection occurs when one party in a transaction has more information than the other, leading to suboptimal market outcomes.

What is moral hazard?

Moral hazard is the risk that a party engages in risky behavior because they do not have to bear the full consequences of that risk.

What is asymmetric information?

Asymmetric information is a situation where one party in a transaction has more or better information than the other party, affecting decision-making.

What is the purpose of a Pigouvian tax?

To internalize external costs and reduce negative externalities by aligning private costs with social costs.

How does cap-and-trade create economic incentives?

By allowing companies to buy and sell emission allowances, encouraging them to find cost-effective ways to reduce pollution.

What is the main criticism of command-and-control regulations?

They can be inflexible and may not provide the most cost-effective solutions for reducing emissions.

What is an example of backward shifting of tax?

A supplier reducing their prices or labor costs in response to a new tax imposed on them.

What is an example of forward shifting of tax?

A company raising the price of its products to cover the cost of new sales taxes.

How do excise taxes influence consumer behavior?

They typically lead to decreased consumption of the taxed goods, such as tobacco or alcohol, by raising prices.

How do percent taxes affect businesses?

They increase the overall cost of doing business, as companies must calculate and remit a portion of their revenue as tax.

What is risk pooling?

Risk pooling is a risk management strategy where multiple parties combine their risks to reduce the impact of potential losses on any single member. This is commonly seen in insurance, where many individuals pay premiums to share the risk of loss.

universal healthcare

a system where all citizens or residents of a country have access to healthcare services without financial barriers

socialized healthcare

a healthcare system in which the government provides healthcare services and funds them through taxation, ensuring that all individuals receive medical care regardless of their ability to pay.

mixed healthcare

a healthcare system that combines elements of both private and public healthcare financing and delivery, allowing for a variety of service options.

single payer healthcare system

a system where a single public or quasi-public agency organizes healthcare financing, but the delivery of care remains largely private. This system typically involves funding healthcare through taxes, ensuring that all residents receive comprehensive medical services without direct charges at the point of care.