Question 1

Suppose you were hired to help a hospital set prices for a typical inpatient day.In this market,the hospital is a monopolist.The hospital faces a downward sloping demand curve where the inverse demand curve is  ,the marginal revenue curve is equal to  ,and marginal cost is constant at MC = $100 per day.What is the equilibrium price,quantity,and profit?

Accepted Answer

The profit-maximizing price and quantity for a monopolist is always found where marginal revenue is equal to marginal cost,MR = MC.In this case,
MR=MC
500-2Q=100
400=2Q
Q=200
Using this value,for quantity we can find the equilibrium price by plugging quantity into the demand curve.P=500-200=300.Profit = (P-MC)Q = (300-100)(200)= $40,000.

Question 2

Let the demand for physician visits have the following demand curve function, where p is price and Q_d is quantity demand.Find the elasticity of demand at a price of $100.

Accepted Answer

The elasticity of demand asks: By what percentage does quantity change for a 1% change in price.A 1% change in price is equal to 1.Quantity at p = 100 is 500 office visits.Quantity at p = 101 is 495.

Question 3

-In the graph above,the opportunity cost in defense dollars associated with moving toward more medical expenditures is

Accepted Answer

The shape of the PPF curve states the opportunity cost in defense dollars is always increasing.

Question 4

Suppose the government institutes new regulations on physicians requiring physicians to take additional years of training before practicing medicine.What will happen to the wages and quantity of physicians?

Accepted Answer

The additional regulation causes a barrier to entry.This will increase wages for current and future physicians,but will decrease the supply of physicians.

Question 5

-In the graph above,point D is

Accepted Answer

All points that lie inside the possibility production frontier are attainable,but only points along the curve are efficient.

Question 6

-In the graph above,point A is

Accepted Answer

All points that lie inside the possibility production frontier are attainable,but only points along the curve are efficient.In this case both points A and B are attainable and efficient.

Question 7

Suppose you are considering becoming a physician.Your current job has an annual salary of $100,000,but you hate your job.If offered a job as a physician for $90,000 you would be indifferent between your current job and this new job.What is your opportunity cost of staying at your job?

Accepted Answer

In this case,your opportunity cost is equal to $100,000 because you are indifferent between the two positions.Although the accounting cost difference favors your current job,you are willing to accept a $10,000 decrease in salary to switch jobs.Therefore,the true value to you of the alternative job is $100,000.

Question 8

Compare and contrast Medicare and Medicaid.

Accepted Answer

The answer of Compare and contrast Medicare and Medicaid....

Question 9

If the supply of registered nurses is Q_S = 40w and the demand for registered nurses is Q_d = 1000 - 10w,find the equilibrium hourly wage (w)the quantity of nurses.Next,find the equilibrium hourly wage the quantity if there is a minimum wage equal to $40.

Accepted Answer

The answer of If the supply of registered nurses is...

Question 10

-In the graph above,which point is not attainable?

Accepted Answer

Point C because it lies outside of the possibility production frontier.

Question 11

Supply curves are upward sloping because of

Accepted Answer

The reason the firm's supply curve is upward sloping is because of the Law of Diminishing Returns.Each additional input yields less product than the previous input.Therefore,it costs more to produce the next unit.

Question 12

-In the graph above,the equilibrium price is regulated to equal P*.This price is a

Accepted Answer

If the regulated price is set above the market price,then we have an effective price floor and there will be a shortage.

Question 13

Suppose the federal government will no longer provide financial support to hospitals (causing some public hospitals to close),but will instead give that money directly to taxpayers in the form of a tax credit on medical expenditures.What will happen to the equilibrium price and the quantity of physician office visits?

Accepted Answer

In this instance,the removal of government assistance to hospitals will shift the supply curve to the left,but the increase in income via the tax credit will increase the demand curve.This will cause price to increase,but the change in quantity is uncertain.A large increase in demand relative to the change in supply will cause quantity to increase.If supply shifts by a greater amount than demand,then quantity will decrease.

Question 14

In a competitive market,firms will continue to produce until marginal cost is equal to

Accepted Answer

The profit-maximizing production level occurs when marginal revenue equals marginal cost,but when markets are perfectly competitive,marginal revenue is equal to price.Therefore,the

Question 15

Demand curves are downward sloping because of

Accepted Answer

Demand curves are downward sloping due to diminishing marginal benefits. Each additional unit of the good provides you with less utility than the previous unit.

Question 16

-In the graph above,what is the opportunity cost in defense dollars associated with moving from point A to point B.

Accepted Answer

You give up 3/4 of a defense dollar to gain an additional medical dollar.

Question 17

Which of the following will not increase the demand for medical services?

Accepted Answer

New cost-saving technology in MRI machines because technology improvements affect supply and not demand.

Question 18

Suppose the demand for Lipitor is equal to  
and the supply function for Lipitor is  .Find the equilibrium price and quantity.

Accepted Answer

The answer of Suppose the demand for Lipitor is equal...

Question 19

There are two types of stents,coil and mesh,used when performing coronary angioplasty.These two stents are substitutes.If the price of coil stents increases,then

Accepted Answer

If the price of a substitute increases,then the demand curve for the product shifts to the right.

Question 20

In the graph above, the market for physician office visits is initially in equilibrium at point A. There is a dramatic increase in the number of physicians, which leads to

Accepted Answer

The change in the number of physicians causes a positive shift in the supply curve,but not the demand curve.Therefore,price will decrease and the quantity demanded will increase.

Quiz 1: An Introduction to the Economics of Medical Care

Let the demand for physician visits have the following demand curve function, where p is price and Qd is quantity demand.Find the elasticity of demand at a price of $100.