Recall the Application About the Possibility of Increases in Health-Care

question 57

Multiple Choice

Recall the Application about the possibility of increases in health-care expenditures crowding out consumption or investment spending to answer the following question(s) . In 1950, health-care expenditures in the United States were 5.2 percent of GDP; by 2000, this share had risen to 15.4 percent. Driving these increases were several factors: increasing relative prices of health care compared to other goods, a larger population of the elderly, and increased longevity. Since 1950, the average life span has increased by 1.7 years per decade.
-According to the Application, if increases in health-care expenditures crowd out investment, living standards would

• A) rise in the long run.
• B) fall in the long run.
• C) fall in the short run, but rise again in the long run.
• D) rise in the short run, and fall back to their original level in the long run.

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Definitions:

Avoidable Cost

Expenses that can be eliminated if a particular decision or action is not taken.

Split-Off Point

The stage in a production process where different products become physically identifiable, and their costs can be separately assigned.

Joint Costs

The costs that are incurred in the production of multiple products up until the point where the products are separable.

Processed Further

A term in cost accounting referring to additional operations or processing steps applied to a product after the initial manufacturing phase.