Health Economics Quiz

See Key Terms for Health Economics. Option E is correct. Opportunity cost is the value of the next best alternative you give up when you choose one option. Health care budgets, staff time and theatre slots are all limited (economists call this scarcity), so every choice to fund one thing means something else goes without. The cost is therefore not just the money spent: it is the benefit that the same money, time or effort would have produced if it had been used on the best alternative. For example, if a hospital spends £1 million on a new scanner, the opportunity cost is the best other use of that £1 million, such as extra nursing posts or more clinic appointments. In a fixed NHS budget, paying for a new treatment usually means displacing existing care, so the opportunity cost is the health that is lost elsewhere. A useful memory aid is that there is no such thing as a free lunch: every pound spent on one service is a pound that cannot be spent on another.

• Opportunity cost: the value of the next best alternative given up when one option is chosen.
• Scarcity: budgets, staff time and theatre slots are limited, so funding one thing means something else goes without.
• Not just money: the cost is the benefit the same resources would have produced elsewhere.