5. (16 marks) Suppose Ontario's healthcare system is subject to a physician cooperative (i.e. cartel) whose...

Transcribed Image Text:

5. (16 marks) Suppose Ontario's healthcare system is subject to a physician cooperative (i.e. cartel) whose objective is to maximize physician salary by limiting physician supply. Letting q denote the number of physicians employed by the healthcare system, the physician salary curve is n(q) = 200,000+ 20q -0.001q2 while the competitive physician inverse supply curve is r(q)=200,000+ 5q. The first function represents the salary arising for a given level of employment while the latter represents the minimum salary required to induce a given level of employment to be supplied. a. Identify two distinct mechanisms, as discussed in lecture, by which the cooperative can control physician supply. 5. (16 marks) Suppose Ontario's healthcare system is subject to a physician cooperative (i.e. cartel) whose objective is to maximize physician salary by limiting physician supply. Letting q denote the number of physicians employed by the healthcare system, the physician salary curve is n(q) = 200,000+ 20q -0.001q2 while the competitive physician inverse supply curve is r(q)=200,000+ 5q. The first function represents the salary arising for a given level of employment while the latter represents the minimum salary required to induce a given level of employment to be supplied. a. Identify two distinct mechanisms, as discussed in lecture, by which the cooperative can control physician supply.