Deck 8: The Supply of Medical Care: an Overview

Question 1

The cost of a national health insurance program would be____ and the availability of services _______ when supply is more ________.

A)Greater;diminished;inelastic
B)Less;diminished;inelastic
C)Greater;diminished;elastic
D)Less;enhanced;inelastic

Answer 1

A
When supply is more inelastic,a national health insurance plan will only give more power to the provider,which will lead to fewer available services and higher cost.

Question 2

The marginal cost curve is upward sloping because

A)Total productivity is rising with production
B)Total productivity is falling with production
C)Marginal productivity is rising with production
D)Marginal productivity is falling with production

Answer 2

D
The marginal cost is increasing with production because the marginal product of the next input is decreasing.

Question 3

Economies of scale

A)Might be more easily realized in an emergency room rather than a physician's office.
B)Depend on the spreading of minimal fixed costs over a number of procedures.
C)Depend on the spreading of high variable costs over a number of procedures.
D)Depend on the spreading of high marginal costs over a number of procedures.
E)Depend on the spreading of high fixed costs over a number of procedures.

Answer 3

E
Answer is "depend on the spreading of high fixed costs over a number of procedures" by definition.

Question 4

Assume that the marginal productivity of an RN is 10 patients and the marginal productivity of an LPN is 2.5 patients.The wage of an LPN is $20 per hour.Find the equilibrium wage for RNs.

Question 5

Monopolistic competition is described as.

A)Many identical firms and intense price competition
B)Many differentiated firms and soft price competition
C)Many differentiated firms and intense price competition
D)Few identical firms and soft price competition

Question 6

If the demand for hospital visits in a city are 10,000 and a typical physician office can accommodate 50 patients per day,the number of physician offices is

A)2000
B)200
C)20
D)Cannot be determined

Question 7

Which market structure is characterized by a large number of differentiated firms?

A)Monopolistic competition
B)Monopoly
C)Oligopoly
D)Perfect competition

Question 8

In the short run,profits can

A)Exceed normal profit
B)Be equal to normal profit
C)Be below normal profit
D)All of the above

Question 9

Suppose a hospital is interested in opening several outpatient clinics.Let n be the number of clinics.The marginal return from each clinic is R = 0.8-0.2n.If the current real interest rate is 10%,how many clinics will be opened up? If each clinic depreciates at a rate of 30%,how many clinics will be open?

Question 10

Suppose there are two hospitals in the market.The inverse demand for Hospital 1 is P = 100 - 2Q and the inverse demand for Hospital 2 is P = 100 - Q.What is the inverse market demand?

A)P = 100 - 3Q
B)P = 200 - 3Q
C)P = 100 - 2 / 3Q
D)P = 200 - 1 / 3Q

Question 11

The average fixed cost curve is

A)U shaped with output
B)Always increasing with output
C)Always decreasing with output
D)None of the above

Question 12

If a hospital displays decreasing average costs on output,should the hospital be regulated even though it is more efficient?

Question 13

Hospitals compete mainly in a _________ market.

A)Product market
B)Quality market
C)Geographic market
D)Price market

Question 14

Using the graph below,answer the following questions:

a)Label supply and demand curve.
b)Indicate the equilibrium price and quantity using MC1 (use P1 and Q1).
c)Indicate the equilibrium price and quantity using MC2 (use P2 and Q2).
d)Using letters and P1 and Q1,what is consumer surplus when MC = MC1?
e)Using letters and P1 and Q1,what is producer surplus when MC = MC1?
f)Using letters and P2 and Q2,what is consumer surplus when MC = MC2?
g)Using letters and P2 and Q2,what is producer surplus when MC = MC2?
h)Who is made worse off by the shift from MC1 to MC2,producers or consumers?
Why?

Question 15

When the patient _______ information,the physician demand curve becomes _____.

A)Lacks;more elastic
B)Lacks;less elastic
C)Lacks;has no effect on demand
D)More;less

Question 16

If a hospital is experiencing economies of scale,

A)Its average cost curve is positively sloped as output increases.
B)Its average cost curve is negatively sloped as output increases.
C)It should reduce its output level to lower costs.
D)Quality is falling as output is rising.
E)Both b and c are true.

Question 17

If the marginal product of the last nurse is equal to 1/N.⁵ and the wage/price ratio is equal to 1/2,then the optimal number of nurses is

A)2
B)4
C)8
D)16

Question 18

Suppose hospital production (Y)is a function of physicians (P)and nurses (N).Let the hospital production function be .The production demonstrates.

A)Increasing returns to scale
B)Constant returns to scale
C)Decreasing returns to scale
D)Both increasing and decreasing returns to scale

Question 19

Oligopoly is described as

A)Few identical firms and intense price competition
B)Many differentiated firms and soft price competition
C)Many differentiated firms and intense price competition
D)Few identical firms and soft price competition

Question 20

One of the benefits of a national health insurance program is that it guarantees a large insurance pool.Why is this a benefit? What economic principle is being addressed here?