Assignment # 1 - (Due by Friday, February 19th
by 11.59 pm)
HW#1 is worth 10 points
Instruction:
Upload your completed Assignment#1 as
WORD document
on Blackboard under folder Assignment 1.
1. Draw a bowed-out production possibilities curve (PPC) with an
aggregate
measure of medical services,
Q, on the horizontal axis and an
aggregate
measure of all other goods (and services),
Z, on the vertical axis. Discuss the implications of the following changes on the quantities of medical services and all other good (2 points).
A. A movement down along the curve.
B. A movement from the interior of the curve to a northeasterly point on the curve.
C. If it were your choice, where would you choose to produce on the PPC? Why?
2. As you know, the U.S. government implemented a variety of policies to limit smoking over the last few decades. Can you provide an example of a structural remedy? How about a conduct remedy? (1 point)
3. Explain how a change in each of the following factors would alter the shape of the total product curve for medical care (2 points).
A. An increase in education
B. An improvement in lifestyle
C. An improvement in the environment
4. Which of the following reimbursement and consumer copayment schemes would have the greatest and lowest likelihood of producing high-cost, low-benefit medicine? Explain your answers (2 points).
A. Fee-for-service plan with 40 percent consumer copayment.
B. Fee-for-service plan with no consumer cost sharing.
C. Fixed-salary plan with no consumer cost sharing.
D. Fixed-salary plan with 40 percent consumer cost sharing.
5. In your own words, use utility analysis and production theory to explain why the demand curve for medical care is downward sloping (1 point).
6. Use a graph to illustrate how the following changes would affect the demand curve for inpatient services at a hospital in a large city (2 points).
A. Average real income in the community increases.
B. In an attempt to cut costs, the largest employer in the area increases the coinsurance rate for employee health coverage from 10 percent to 20 percent.
END