Economics

1. [10] In Alberta, doctors have traditionally been paid on a fee-forservlce basis. For example, a general practitioner would be paid $413.52 for "minor consultation" in ofce. More complex procedures get \"modifiers" which increase the billing amount. In this case, Alberta Health Services is the principal, and the doctor the agent. 3. Explain brieyr the moral hazard and adverse selection issues that arise. b. One solution that has been proposed and is used for some doctors is "capitation\" in which. doctors are responsible for care for a patient and get paid a fee for having that patient on their rolls, whether they-give them anyr care or not. How does this differ in terms of moral hazard issues? Is this better .or worse? 2. [10] Coal mining in the Eastern slopes of the W W The coal miners can invest in spill mitigation to reduce those threats, but this investment is expensive. 3. Explain how the Cease theorem could work in this case to get the \"optimal" amount of coal mining, assuming that the government imposes no regulations to enforce investment in spill mitigation. Use a graph with "probability of spill\" on the horizontal axis and $ on the vertical axis to compare harm to water users with cost of mitigation to miners. b. Given that it is hard for all potential water users to collaborate [given free- -riding], is there a role for government to plav?'Consider the options for either regulation [minimal investment in mitigation] or a ne on spills. Show how these would work. in a graph. 3. [5] Ioe obtains utility,' from wealth according to 110v) = wu'5. She has $10,000. She is offered a chance to buy a. lottery ticket which would be worth $10,091] if she wins, but the probability of winning is only 5%. What is the most she would be willing to pay for the ticket? [You can leave the solution. as single equation with one unknown if you want.)