The Economics of Healthcare HOMEWORK # 7 Improvements in the health have increased the production possibility frontier (shifted #1 out) for many years. However, this improvement has not be standard as there have been periods of declining health. Once such episode was in 1918 in the United States when health of citizens actually reduced (The Spanish Flu swept around the globe causing misery and a decline in the health of the population). Explain and SHOW GRAPHICALLY what likely happened to the PPF in the U.S. in 1918? #2 Define the following terms: a. Health insurance b. Fee-for-service c. Single-payer health care system d. Asymmetric information e. Adverse selection f. Moral hazard g. Principal-agent problem #3 An article in the Wall Street Journal argues that "defensive medicine" is helping drive up health costs. That the fear of malpractice lawsuits is causing physicians to order more test and procedures than they otherwise would. Please discuss this in the context of some of the terms defined in Question #2? #4 What causes asymmetric information? #5 When people who face no negative consequence in poor decisions, and make even worse decisions because they are covered by insurance are impacted by what effect? Example, banks behaved poorly since they knew that any negative event would be helped by government intervention).HOMEWORK # 8 Technology, Production, and Costs #1 What is the difference between the short-run and the long-run? Is the amount of time that separates the short-run and long-run the same for each firm? #2 Illustrate (Draw the Graph) that shows the typical relationship between the marginal product of labor and the average product of labor. Explain why are the curves shaped as they are? #3 Bob owns a popcorn shop. Bob has 2 popcorn poppers for his business which he pays $20 per day for each (or $40 per day total). Assume that he is unable to get additional popcorn popping equipment quickly. He can, however, hire as many workers as he wishes rapidly. He must pay each worker $40 per day. a. fill in the grid (Figure 1) b. draw the average total cost curve and the marginal cost curve. Figure 1 Quantity of Quantity of Copies per Fixed Variable Total Average Marginal Workers Day Cost Cost Cost Total Cost Cost 0 0 1 500 1,100 W N 1,500 4 1,800 2,000 2,100 #4 Explain how each of these events would likely affect each of the cost curves at Zimmer Airlines: MC, AVC, AFC, ATC Zimmer Airlines signs a new contract with the Workers Union that requires the airline to increase wages for flight attendants. b. Zimmer Airline was a big polluter and the government fined the airline $20 per ticket sold. C. Zimmer Airline run terribly and cannot make a profit. Executive salaries are cut by 10%. d. Zimmer decides to increase its advertising budget 10% to sell more tickets.Figure 2 Total Product 75 68 66 57 . . . .. .. 42 15 O 8 Labor (units) Image Copyright Protected @ 6985 2558 19225 PDK 3587 CGT985 #5 Refer to Figure 2. The marginal product of the 7th worker is Figure 3 Output per unit of labor L1 LZ L3 Labor (units) E Image Copyright Protected @ 3265 6985 19681 SW 4731 DSER658 STANDRA DVA UM Where The curve labeled "E" is the marginal product curve. The curve labeled "F" is the average product curve. #6 Refer to Figure 3. Diminishing returns to labor set in after? (after which point?)HOMEWORK # 9 Firms in Perfectly Competitive Markets Figure 1 Quantity Total Cost Total Variable Cost 0 $1,000 100 1,250 200 250 1,350 350 300 1,550 550 400 1,850 850 500 2,250 1,250 600 2,750 1,750 Figure 1 shows the short-run cost data of a perfectly competitive firm that produces plastic camera cases. Assume that output can only be increased in batches of 100 units. #1 Refer to Figure 1. If the market price of each camera case is $1 and the firm maximizes profit, what is the amount of the firm's profit or loss? #2 Draw a graph showing a firm that is making profits in a perfectly competitive market. Include curves for demand, marginal revenue, marginal cost, average total cost, and average variable cost. Also shade the area that represents to firm's economic profit.#3 Zimmer Company produces cheap surfboards Figure 2 Output per Week Total Cost AFC AVC ATC MC 0 $100.00 1 155.70 205.60 3 253.90 304.80 5 362.50 6 431.20 515.10 618.40 60 00 745.30 10 900.00 a. Fill in the missing values (Figure 2) b. Suppose the market equilibrium price is $100. How many surfboards should be produced to maximize profit? What should the price be? What will the profit be? c. Suppose the market equilibrium price is $65. How many surfboards should be produced to maximize profit? What should the price be? What will the profit be? d. Suppose the market equilibrium price is $50. How many surfboards should be produced to maximize profit? What should the price be? What will the profit be? #4 Figure 3 Price MC and cost ATC per unit AVC P Demand = MR O Q Quantity Indicate on the graph what indicates the following a. Total cost b. Total revenue c. Variable cost d. Profit or Loss