Recent news articles have described how doctors in some states, New Jersey among them, have decided not to practice medicine for some period, or to retire early, in response to sharp increases in medical malpractice insurance rates. (Malpractice insurance is insurance almost all physicians purchase to protect themselves against lawsuits filed by patients who allege that the doc- tors, by violating some standard of care, injured the patient in some way. The damages collected in some of these cases runs into the millions of dol- lars. Malpractice insurance costs for surgeons were reportedly $250,000 per year.)

a. Since it takes several years to produce new doctors, in the short run, the supply of doctors is relatively fixed. Indicate on a supply and demand dia- gram the market for physicians' services in the short run.

b. Treating the payments for malpractice insurance as a tax on physicians' earnings, in the short run, who likely pays most of the cost of these pre- miums, the doctors themselves, or are they able to pass these costs on to their patients?

c. In the long run, medical students will choose specialties in part by the amount of these malpractice premiums. The premiums are especially high in fields that involve invasive procedures, such as surgery and obstetrics, and relatively low in, for example, family practice medicine. How will these increased malpractice rates affect the markets-prices and quantities-for surgery and for family practice medicine, in the long run?