Reference no: EM131459746
A study done by a group from the Harvard School of Public Health in 1988 indirectly supported the relationship between the price a consumer pays and the marginal utility the consumer receives for medical services. The study claimed that the charges for surgery were "too high" while charges for doctor consultations and office visits were "too low." An hour of a doctor's time in surgery earned a great deal more than an hour of consultation in the office. If more prevention through consultation could result in less need for surgery, why should the fees for corrective medical surgery be so much greater than the fees for diagnosis and prevention of medical problems? Therefore the Harvard group recommended higher fees for consultation and lower fees for surgery. They determined that such changes would more accurately reflect the value of each service.
Yet consumers willingly pay more for surgery than consultation. Why? Because the marginal utility received from an hour of surgery is determined to be much greater than the marginal utility from an hour of consultation. Consumers allocate their expenditures with an awareness of the ratio of the marginal utility from a good or service to its price.
"Doctors' Fees Called Out of Balance," The Christian Science Monitor, September 29, 1988, p. 3.
If the results of the study are correct, a typical consumer using the equimarginal rule would be expected to:
A) purchase fewer consultations and more surgeries.
B) purchase the same number of both services.
C) purchase more consultations and fewer surgeries.
D) purchase less of both services.
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