provide the answers to the following the question is complete

1. Consider a physician who receives m dollars in income per unit of service she provides. The physician values her income, her leisure time, and her patients' health. The physician may choose to induce I 0 units of services. If the physician induces no services, she provides Q0 > 0 units of services. (a) Show the physician's budget set and an indifference curve on a diagram, placing I on the x-axis and the physician's income on the y-axis. Label all axes, intercepts, and curves. (b) Assume the physician prefers to induce a strictly positive number of services. Show her optimal allocation on a new version of the diagram and label it A. Show the indifference curve passing through point A. (c) Interpret the slope of the indifference curve evaluated at point A and state the physician's equilibrium condition. (d) On another new version of the diagram, display the physician's new budget set if the fee, m, decreases. (e) On the same diagram as in part (d), display the physician's new optimal allocation at the lower fee, assuming the physician sets I > 0, and label this point B. Carefully display the income and substitution effects on inducement caused by the fee change, assuming their signs are as we assumed in the lectures.

2. Consider a competitive market for health care. First suppose there is no health insurance available. Suppose demand for health care is given by Q D = 10 2P, (1) where QD is quantity demanded and P D is the price paid by consumers. Supply is given by Q S = P. (2) where QS is quantity supplied and P S is the price received by firms. (a) Show the supply and demand schedules on a diagram. (b) Find the equilibrium price and quantity mathematically. (c) Now suppose the government introduces an insurance program which pays 50% of all health care expenditures. Placing prices faced by firms on the y-axis, display supply and demand schedules under this insurance plan on a new diagram (Hint: if you cannot do this mathematically, try finding two points on the new (linear) demand schedule). (d) Find the new equilibrium price and quantity. (e) Indicate the deadweight loss caused by the insurance program on your diagram. (f) Calculate the arc elasticity of supply for health care between the equilibria in part (b) and part (d). (g) Now relax the assumption that the market is competitive. Present and very briefly discuss TWO reasons why the government insurance program may increase social welfare.

19. In Grossman's model, an increase in education causes better health because (a) people who choose higher levels education tend to have other characteristics which are associated with good health. (b) people endowed with higher levels of education are more efficient producers of health. (c) people with high temporal discount rates are both more likely to smoke and less likely to go to university. (d) moral hazard induces people to select low-paying jobs when the MEI schedule is inelastic. 20. Life expectancy in Canada is much higher in 2011 than it was in 1800 primarily because of (a) improvements in living standards such as housing, nutrition, and sanitation. (b) improvements in medical technology. (c) massive increases in labour and capital devoted to health care (such as physicians and hospitals). (d) reductions in smoking and other unhealthy behaviors that allow people to now commonly live into their 80s and 90s. 21. Canada spends less per capita on health care than the U.S. primarily because (a) Canadians use less health care because the Canadian system efficiently rations scarce care. (b) the Canadian single-payer system has lower administrative costs. (c) prices and wages in the health sector are lower in Canada. (d) the profit motive the U.S. leads providers to induce demand for their services. 22. The Second Fundamental Theorem of Welfare Economics asserts that (a) all competitive equilibria are Pareto efficient. (b) welfare is maximized when social indifference curves are tangent to the PPF. (c) welfare payments are a more efficient manner of redistributing income than trade on Pareto manifolds. (d) any Pareto efficient allocation may be obtained as a competitive equilibrium.

23. The government currently spends $2B on highway maintenance and $1B on asbestos removal per year. Saving another statistical life through highway maintenance programs is estimated to cost $10M, whereas saving another life through asbestos removal programs is estimated to cost $20M. Assume the only effect either program has is on lives saved. Then the government should (a) reallocate funding from highway maintenance to asbestos removal until expenditures are equalized across programs. (b) reallocate funding from highway maintenance to asbestos removal until cost to save another life is equalized across programs. (c) reallocate funding from asbestos removal to highway maintenance until expenditures are equalized across programs. (d) reallocate funding from asbestos removal to highway maintenance until cost to save another life is equalized across programs. 24. The elasticity of population health to national health care expenditures in the U.S. is thought to be (a) highly elastic and positive. (b) highly inelastic and positive. (c) highly inelastic and negative. (d) unknown; it is impossible to estimate that relationship. 25. We interpreted the patient-physician interaction as a principal-agent problem in the sense that (a) the physician acts as a principal, and the patient as an agent, because the physician's behavior is hidden to the patient. (b) the physician acts as an agent, and the patient as a principal, because the physician's behavior is hidden to the patient. (c) the physician acts as a principal, and the patient as an agent, because the patient's behavior is hidden to the physician. (d) the physician acts as an agent, and the patient as a principal, because the patient's behavior is hidden to the physician.