Suppose we allocate a budget for flu shots between physicians and licensed physician assistants. Let MBP equal the marginal benefit from physician administering flu shot and MCP equal the marginal cost of physician administering flu shot. Let MBA equal the marginal benefit from physician assistant administering flu shot and MCA equal the marginal cost of physician assistant administering flu shot.
-Currently, the MB_P/MC_P < MB_A/MC_A. We can correctly conclude that

Question

Quizplus · Accepted Answer

At the optimum, the ratio of marginal productivity to input cost is the same for all inputs. For this inequality to become an equality, the value of the right-hand side of the expression should decrease. This can happen only if more physician assistants start administering flu shots, since as more of an input is employed, its marginal productivity (MB_A) declines. For comparison reasons, if we would instead consider employing more physicians to administer flu shots, their marginal productivity (MB_P) would decline too, which would bring the left-hand-side of the expression even further away from the desired equilibrium.

Suppose We Allocate a Budget for Flu Shots Between Physicians