Refer to the Graph Shown That Depicts a Third-Party Payer

question 37

Multiple Choice

Refer to the graph shown that depicts a third-party payer market for prescription drugs. What happens to total expenditures in this market if a $2 co-pay is established compared to a free-market equilibrium?

• A) Expenditures rise to $240
• B) Expenditures rise to $270
• C) Expenditures fall by $120
• D) Expenditures remain at $120

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Definitions:

Total Cost Concept

An approach that considers all variable and fixed costs associated with the production of goods or services.

Manufacturing Cost

The total expense involved in the manufacturing of a product, including raw materials, labor, and overhead costs.

Desired Profit

The amount of financial gain a company aims to achieve from its operations, often used in setting prices and targets.

Period Cost

Costs that are not directly tied to the production process and are expensed in the period in which they occur.