Medicare Is an Example of a Third-Party Payment for Medical

question 165

Multiple Choice

Medicare is an example of a third-party payment for medical services that

• A) causes providers to supply less of medical services than they would without the payment.
• B) causes buyers to consume more of medical services than they would without the payment.
• C) does not cause any change in the equilibrium position for medical services which existed without the subsidy.
• D) causes the price of medical services to rise for the consumer once the payment is provided.

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Definitions:

Price Setter

An entity, often a dominant firm or a monopoly, that has the ability to influence the market price of goods or services rather than being a price taker.

Price Taker

An individual or company that must accept prevailing prices in the market, having no influence over them.

Perfect Competition

A market structure characterized by a large number of small firms, a homogeneous product, and very easy entry and exit, leading to firms being price takers.

Natural Monopoly

A market condition where a single firm can supply a product or service at a lower cost than two or more firms, due to economies of scale.