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Subpart (a):
To draw:The demand curve for medical care by showing the procedure required if each procedure has a price of $100.
Subpart (b):
The quantity of procedure required if consumers are ready to pay $20 per procedure. Also, to find whether the number of procedures performed will maximize the overall surplus, if the optimal rate for each procedure is truly $100, and individuals have health insurance.
Subpart (c):
Whether the usage of care are considered to be excessive when the economists blame the health insurance system for these usage of medical care.
Subpart (d):
The policies that can prevent the excessive usage of medical care.
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Chapter 7 Solutions
Bundle: Principles of Macroeconomics, Loose-Leaf Version, 7th + Aplia, 1 term Printed Access Card
- 1. Utility and Consumer Surplus A. Use the figure below to fill in the total utility and marginal utility of medical care in the table. In this example, is the marginal utility of health care increasing or decreasing? What are some reasons why this might be the case (briefly explain; approximate 3 sentences)? Health (H) Utility 16 15 13 10 3 4 Medical care (q) 1 2 Units of Medical Care 0 1 Total Utility Marginal Utility 2 3 4 Briefly explain: Conceptually, does the marginal utility scheduled above reflect your own demand for going to the dentist to get a check-up?arrow_forwardDraw a market where consumers demand health insurance and insurance companies supply insurance at a price of insurance called the premium. Explain why, in this model of the insurance market, the individual mandate (the mandate is everyone has to have insurance) will cause health insurance premiums to increase.arrow_forwardUse a graph to illustrate how the following changes would affect the demand curve for inpatient services at a hospital in a large city. a. Average real income in the community increases. b. A number of physicians in the area join together and open up a discount-price walk-in clinic; the cross-price elasticity of demand between physician services and inpatient hospital services is –0.50.arrow_forward
- Use the black point (plus symbol) to indicate the quantity of procedures ded if each procedure has a price of $100. Then use the grey point Consider how health insurance affects the quantity of health care services performed. Suppose that the typical medical procedure has a cost of $100, yet a person with health insurance pays only $20 out of pocket. Her insurance company pays the remaining $80. (The insurance company recoups the $80 through premiums, but the premium a person pays does not depend on how many procedures that person chooses to undergo.) (star symbol) to indicate the quantity of procedures demanded if each procedure has a price of 520. 200 180 Q at P-$100 160 140 120 Q, at P=$20 100 20 60 40 Demand 30 40 50 80 70 801 90 100 Quantity of Medical Procedures 20 10 20 Price of Medical Proceduresarrow_forward10:26 A Homework IV.pdf 3. If substitution effect is greater than income effect, would physicians spend more time with existing patients or would they switch the more lucrative patients. Explain. 4. What is value-based- purchasing, was it successful for reducing unnecessary utilization. 5. According to economists, competitive market provides best outcome for consumer, lowest possible price with highest possible quantity. Why would this not work with health care market, and concentration of hospitals might be good idea? 6. Give examples of horizontal and vertical integrations in health care systems? 7. If the concentration of hospitals and insurance companies might be necessary, why do we need Department of Justice or Federal Trade Commission to investigate the merger and acquisitions? 8. From the following graph, show the equilibriums under each scenario. Market is in equilibrium at A under competitive market. (a) Show the equilibrium under monopoly. Call this point B (b) When the…arrow_forwardWhat are the equilibrium price and quantity of medical checkup?arrow_forward
- 3rd party payments often cause the cost of health care to go down does third party payments to cover medical costs bring the price of medical services up?arrow_forwardWhat is the relationship between health and health economics?arrow_forward2. In the following graph, suppose market is in equilibrium at point A. Determine if you agree or disagree with the statements. a. Suppose there is an increasing in demand for health care services but no changes in supply, then the new equilibrium will be at point C. b. From equilibrium point A, if there exist an increase in supply of the doctors in the area, the new equilibrium would be at point B. c. From equilibrium point A, if there is an induced demand from the increased number of doctors in the area, the new equilibrium would be at point C. d. If the demand curve is D', one can not say that there is an induced demand with the increase of physicians in the area. Q₂ Q₁ Quantity of Services Delivered Price per Unit Outputarrow_forward
- What would happen if, in order to provide lower cost health care, the government decided to set a price ceiling (Pmax) in the health insurance market? (Please answer questions a, b, and c below.) What is the effect of this maximum price legislation on the market for health insurance? Briefly explain the situation for both consumers and producers (i.e. health care providers). What might the government do to achieve their intended aims (i.e. lower costs and increased quantity)?arrow_forward6. The demand for the doctor's visits, Q, is the following: Q= 5 – 0.04P. The market price of a visit, equals the MC of $100. What is the equilibrium number of visits? What if the consumer purchases full-coverage (no coinsurance) health insurance and the demand stays the same. How many doctor visits would the patient consume? Calculate the deadweight loss or moral hazard cost as a result of the insurance coverage. Remember, DWL is there if units for which MB>MC are not produced, or if units for which MC>MB are produced.arrow_forwardThe 2010 health reform law fails to provide universal health insurance coverage. T or F?arrow_forward
- Principles of Economics 2eEconomicsISBN:9781947172364Author:Steven A. Greenlaw; David ShapiroPublisher:OpenStax
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