Final answer:
In a monopsony, such as a single-payer system, the quantity and price of medical care are generally lower than in a perfectly competitive market. However, a single-payer system can maintain service quantities while lowering costs if it achieves greater efficiency and economies of scale.
Step-by-step explanation:
Single-Payer System vs. Competitive Market
In a perfectly competitive market, price and quantity of medical care are determined at the equilibrium point where demand (D1) equals supply (S1). Here, a large number of suppliers compete, resulting in the hiring of Lc workers at the wage We. Conversely, in a monopsony, such as a single-payer healthcare system, the sole buyer (the government) has significant market power. This allows it to influence the price of medical care, often resulting in a lower price (Pl) and quantity (Ql) compared to a competitive market where many employers would hire Lc workers at a competitive wage Wc.
However, under certain conditions, a single-payer system can maintain medical care quantity while reducing costs. This could occur if the system achieves greater efficiency, reduces administrative costs, or leverages economies of scale. It is crucial to note that monopsony employers have such market power that they might pay a lower wage than in a competitive market, and thus might hire fewer workers.