(Chapter 6) (10%) Explain the effect of the
following changes on the quantity demanded of health insurance. A.
A reduction in the tax-exempt fraction of health insurance premiums
B. An increase in buyer income C. An increase in per capita medical
expenditures D. New technologies that enable medical illnesses to
be predicted more accurately. E. A tendency among buyers to become
less risk averse, on average.
HCAD 4354 Economics for Healthcare Homework 2 The homework
covers the textbook Ch 6-8. You may discuss the questions with
classmates. However, it must be your individual work. Copying
answer from others will violate ACADEMIC HONESTY policy to cause a
failing grade. Please show the derivation process and limit your
answers within 5 pages. Highlight the answer for each question in
MS Word format. No cover sheet is required. If you don’t know how
to edit math notations, just explain the process. Please submit you
solution file as an attachment. Q1: (Chapter 6) (10%) Suppose Joe
and Leo both face the following individual loss distribution:
Probability of Loss Amount of Loss 0.7 $0 0.2 $40 0.1 $60 A.
Determine the expected loss and standard deviation of the expected
loss faced by Joe and Leo on an individual basis. B. Suppose that
Joe and Leo enter into a pooling-of-losses arrangement. Just state
what happens to the expected loss and variability of the expected
loss as a result of the pooling arrangement (you don’t need to
calculate). Q2: (Chapter 6) (10%) Explain the effect of the
following changes on the quantity demanded of health insurance. A.
A reduction in the tax-exempt fraction of health insurance premiums
B. An increase in buyer income C. An increase in per capita medical
expenditures D. New technologies that enable medical illnesses to
be predicted more accurately. E. A tendency among buyers to become
less risk averse, on average. Q3: (Chapter 6) (10%) Explain the
following terms related to health insurance: H. Gatekeeper I. Gag
rules J. Any willing provider law K. Freedom of choice law 2 Q4:
(Chapter 7) (10%) Explain the difference between technical
efficiency and economic efficiency. Q5: (Chapter 7) (10%) Suppose
that with 400 patients per year, the SAFC, SATC and SMC of
operating a physician clinic are $10, $35, and $30 per patient,
respectively. Furthermore, suppose the physician decides to
increase the annual patient load by one more patient. Using
short-run cost theory, explain the impact of this additional
patient on the SAVC and SATC. Do they increase or decrease? Why?
Q6: (Chapter 7) (10%) You are responsible for hiring one of two
hygienists for a dental office. The first dental hygienist has 25
years of experience. Given her record, she is likely to
satisfactorily service 16 patients per day. Her hourly wage would
be approximately $16 per hour. The other hygienist is new to the
industry. He is expected to satisfactorily service 10 patients per
day at an hourly wage of $8. Which dental hygienist would be the
better hire? Why? Q7: (Chapter 8) (15%) In the country of Drazah
Larom (moral hazard spelled backward), health insurance is
nonexistent and all medical markets are perfectly competitive. Use
supply and demand analysis to explain the impact of the following
changes on the price and output of physician services. (Unnecessary
to show graph) A. A decrease in the wage of clinic-based nurses. B.
The adoption of cost-enhancing medical technologies. C. An aging
population and correspondingly a more severe patient case-mix. D.
Declining consumer income. E. A lower market price for physician
services (be careful here!). Q8: (Chapter 8) (15%) Assume the sale
of human organs is legalized and a free market develops.
Furthermore, assume the market is in equilibrium. Trace through the
price and output effects of the following: (unnecessary to show
graph) A. An increase in the incomes of potential buyers of human
kidneys. B. A decrease in the price of kidney dialysis. C. The
development of a new drug that leaves the immune system intact
while preventing transplant rejection (Waldholz, 1992). D. A
greater willingness by individuals to supply human kidneys. Q9:
(Chapter 8) (10%) Suppose that the annual number of admissions can
be used as a measure of output for a group of hospitals operating
in the same RGM. Categorize the type of market based on the degree
of structural competition as measured by the four-firm
concentration ratio and the Herfindahl-Hirschman Index. (Hint:
calculate market share for each one first) 3 Hospital Number of
Admissions (in thousands) Saving Grace Hospital 4,000 Mercy Me
Hospital 3,000 Price Plus Hospital 1,500 HealthMart Hospital 750
Health Depot Hospital 1,000 Health R Us Hospital 1,500
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