Economics 13th Edition by James Gwartney, Richard Stroup, Russell Sobel, David Macpherson

Exercise 7

Most systems of medical insurance substantially lower the out-of-pocket costs consumers have to pay for additional units of physician services and hospitalization. Some reduce these costs to zero. How does this method of payment affect the consumption levels of medical services? Might this method of organization result in "too much" consumption of medical services? Discuss.