Question 1

In the short run, the average fixed cost of production _______ as the quantity of medical services _______.&#10;A) decreases; decreases&#10;B) increases; increases&#10;C) doesn't change; increases&#10;D) doesn't change; decreases&#10;E) decreases; increases

Accepted Answer

In the short run, average fixed costs decrease as the quantity of output (in this case, medical services) increases because fixed costs are spread over a larger number of units, reducing the cost per unit.

Question 2

_______ reflect the alternatives given up by using resources to produce medical services.&#10;A) Marginal costs&#10;B) Fixed costs&#10;C) Explicit costs&#10;D) Implicit costs&#10;E) Variable costs

Accepted Answer

Implicit costs reflect the opportunity costs of using resources for one purpose instead of the next best alternative, which could also include potential forgone income or benefits. In the case of medical services, implicit costs could include the wages that physicians and nurses could earn if they chose a different profession or work in a different field, as well as the time and money invested in their education and training.

Question 3

Assuming that a hospital seeks to minimize total costs, what should it do if the marginal productivity per dollar spent on nurses is less than the marginal productivity per dollar spent on physicians?&#10;A) The hospital should utilize more nurses and fewer physicians.&#10;B) The hospital should utilize fewer nurses and more physicians.&#10;C) The hospital should utilize fewer nurses and fewer physicians.&#10;D) The hospital should utilize more nurses and more physicians.&#10;E) There is not enough information to determine the appropriate action.

Accepted Answer

If the marginal productivity per dollar spent on physicians is higher than that of nurses, it's more cost-effective for the hospital to utilize more physicians and fewer nurses. This will reduce the total cost of operations while maintaining or even improving the quality of healthcare services.

Question 4

If the marginal product is greater than the average product of physicians, then the average product of physicians must be increasing.

Accepted Answer

If the marginal product of physicians is greater than the average product, then each additional physician added to the production process is contributing more than the previous physicians on average. This will increase the average product and result in an increasing trend.

Question 5

The _______ of nurses is represented as the total amount of medical services produced divided by the total amount of nurse-labor.&#10;A) marginal product&#10;B) marginal cost&#10;C) average product&#10;D) opportunity cost&#10;E) none of the above

Accepted Answer

The concept of average product is used to measure the productivity of labor in terms of the output produced per unit of input. Therefore, the answer is represented as the total amount of medical services (output) produced divided by the total amount of nurse-labor (input), which is the definition of average product. Marginal product measures the change in output due to a change in input, while marginal cost measures the cost of producing one more unit of output. Opportunity cost is the value of the next best alternative that must be given up in order to pursue a certain action. None of these concepts directly measure the productivity of labor.

Question 6

If the average product of dental assistants is _______, then the marginal product of that labor must be _______ its average product.&#10;A) increasing; less than&#10;B) decreasing; equal to&#10;C) decreasing; less than&#10;D) increasing; equal to&#10;E) decreasing; greater than

Accepted Answer

According to the law of diminishing marginal returns, as more units of a variable input (such as labor) are added to a fixed input (such as machinery), the marginal product of that variable input eventually decreases. Therefore, if the average product is decreasing, it implies that the marginal product must be less than the average product. Option C is the only one that reflects this relationship.

Question 7

_______ occur when the cost of producing a medical service decreases as the quantity produced increases.&#10;A) Economies of scale&#10;B) Economies of scope&#10;C) Diseconomies of scale&#10;D) Diseconomies of scope&#10;E) None of the above

Accepted Answer

Economies of scale occur when the cost per unit of a product or service decreases as the volume produced increases. This is due to the spreading of fixed costs, such as equipment and labor, over a greater number of units. In the case of medical services, as the quantity produced increases, the fixed costs associated with running a medical facility or practice can be spread over a greater number of patients and services, resulting in lower costs per service.

Question 8

_______ occur when the cost of producing two outputs is less than the sum of the costs incurred when producing each output individually.&#10;A) Economies of scale&#10;B) Economies of scope&#10;C) Diseconomies of scale&#10;D) Diseconomies of scope&#10;E) None of the above

Accepted Answer

Economies of scope occur when producing two different products together results in cost savings compared to producing each product separately. This is different from economies of scale, which refer to cost savings achieved through producing a larger quantity of a single product. Diseconomies of scale and scope refer to cost increases that occur when a company grows too large or diversifies too much, respectively. None of the above is not the correct answer in this case, as there is a correct option.

Question 9

Short-run average variable costs decrease initially, but then begin to rise due to diminishing marginal productivity of labor.

Accepted Answer

In the short-run, as more variable input (such as labor) is added to the production process, the average variable cost may initially decrease due to economies of scale. However, as the amount of variable input increases beyond a certain point, the marginal productivity of the input decreases, leading to an increase in average variable cost. This is known as the law of diminishing marginal returns.

Question 10

Which of the following best explains why production might increase at a decreasing rate with the addition of a variable input?&#10;A) Increasing marginal opportunity costs&#10;B) Increasing marginal productivity of labor&#10;C) Diminishing marginal productivity of labor&#10;D) Advancements in technology&#10;E) Diminishing marginal opportunity costs

Accepted Answer

The principle of diminishing marginal productivity states that as more units of a variable input, such as labor, are added to a fixed input, such as capital, the marginal productivity of each additional unit of the variable input will eventually decline. This means that the increase in output from each additional unit of the variable input will be smaller than the increase in output from the previous unit.

Question 11

The _______ of nurses is represented as the change in medical services provided by an additional unit of nurse-labor.&#10;A) marginal product&#10;B) marginal cost&#10;C) average product&#10;D) opportunity cost&#10;E) none of the above

Accepted Answer

The answer of The _______ of nurses is represented as...

Question 12

If a hospital is cost-minimizing, then the marginal productivity per dollar spent on physicians must be equal to the marginal productivity per dollar spent on nurses.

Accepted Answer

The answer of If a hospital is cost-minimizing, then the...

Question 13

In the short run, if the marginal cost of production is equal to the average total cost of production, then the average total cost is _______.&#10;A) less than the average variable cost&#10;B) less than the average fixed cost&#10;C) maximized&#10;D) minimized&#10;E) equal to the average variable cost

Accepted Answer

The answer of In the short run, if the marginal...

Question 14

If a hospital is experiencing diseconomies of scale, it can reduce the average total cost of production by producing a greater quantity of medical services.

Accepted Answer

The answer of If a hospital is experiencing diseconomies of...

Question 15

Previously paid sunk costs do not factor into most decisions since they can't be recouped.

Accepted Answer

The answer of Previously paid sunk costs do not factor...

Deck 7: Medical Care Production and Costs