Questions and Answers of The Law Of Healthcare Administration

1. If the MSC in Example 2 had been $580 instead of $360, what would the socially optimal, or efficient, outcome have been?
3. Would bad weather be something that could affect the voter turnout? Explain your answer.
2. Voters often criticize politicians running for office who do not speak in specific terms (tell them what spending programs will be cut, whose taxes will be raised, etc.). If voters want
1. If a politician running for office does not speak in general terms, does not try to move to the middle of the political spectrum, and does not take polls, does it follow that the median voter
3. Give an example that is not discussed in the text and that illustrates moral hazard.
2. Adverse selection has the potential to eliminate some markets. How is this possible?
1. Give an example that illustrates how asymmetric information can lead to more of a good being consumed than if there is symmetric information.
3. Give an example, other than a movie in a movie theater or a play in a theater, of a good that is nonrivalrous and excludable.
2. Identify each of the following goods as a nonexcludable public good, an excludable public good, or a private good:a. Composition notebook used for writing.b. Shakespearean play performed in a
1. Why does the market fail to produce nonexcludable public goods?
3. Under market environmentalism, the dollar amount firm Z has to pay to buy the pollution permits from firms X and Y is not counted as a cost to society. Why not?
2. Why does reducing pollution cost less by using market environmentalism than by setting standards?
1. The layperson finds it odd that economists often prefer some pollution to no pollution. Explain how the economist reaches this conclusion.
4. What condition must be satisfied for a tax to correctly adjust for a negative externality?
3. Does the property rights assignment a court makes matter to the resource allocative outcome?
2. Are the transaction costs of buying a house higher or lower than those of buying a hamburger at a fast-food restaurant? Explain your answer.
1. What does it mean to internalize an externality?
3. “Profit is not simply a dollar amount; it is a signal.” Comment.1. What is the major difference between the market output and the socially optimal output?2. For an economist, is the socially
2. Why does profit exist?
1. What is the difference between risk and uncertainty?
3. What are the social consequences of firms competing for artificial rents, as opposed to competing for real rents (where there are no barriers to competing for real rents)
2. Nick’s salary is pure economic rent. What does this imply about Nick’s next best alternative salary?
1. Give an example to illustrate that economic rent differs depending on the perspective from which the factor is viewed.
4 years and cost $7,000. The interest rate is 8 percent. Should the firm buy the capital good? Explain your answer.
4. A business firm is thinking of buying a capital good, which will earn $2,000 a year for the next
3. What is the present value of $1,000 two years from today if the interest rate is 5 percent?
2. Why does the real interest rate, and not the nominal interest rate, matter to borrowers and lenders?
1. Why does the price for loanable funds tend to equal the return on capital goods?
3. What is the general description of a disproportionate percentage of the poor?
2. What percentage of the U.S. population was living in poverty in 2006?
1. “Poor people will always exist.” Comment.
2. A person decides to assume a lot of risk in earning an income. How could this affect her income?
1. Jack and Harry work for the same company, but Jack earns more than Harry. Is this evidence of wage discrimination? Explain your answer.
2. Country A has a Gini coefficient of 0.45. What does this mean?
1. Starting with the top fifth of income earners and proceeding to the lowest fifth, suppose the income share of each group is 40 percent, 30 percent, 20 percent, 10 percent, and 5 percent. Can these
3. Smith and Jones have the same income this year: $40,000. Does it follow that their income came from the same sources? Explain your answer.
2. “Income inequality at one point in time is sometimes consistent with income equality over time.”Comment.
1. How can government change the distribution of income?
3. How could a collectively bargained higher wage rate in the unionized sector of the economy lead to a lower wage rate in the nonunionized sector of the economy?
2. Under what conditions will the minimum wage increase the number of people working?
1. What is a major difference between a monopsonist and a factor price taker?
3. What is the objective of a strike?
2. What is the difference between a closed shop and a union shop?
1. What will lower the demand for union labor?
4. Workers in labor market X do the same work as workers in labor market Y, but they earn $10 less per hour. Why?
3. Why are wage rates higher in one competitive labor market than in another? In short, why do wage rates differ?
2. Suppose the coefficient of elasticity of demand for labor is 3. What does this mean?
1. The demand for labor is a derived demand. What could cause the firm’s demand curve for labor to shift rightward?
4. How much labor should a firm purchase?
3. What is the distinguishing characteristic of a factor price taker?
2. What is the difference between marginal revenue product (MRP ) and value marginal product (VMP )?
1. When a perfectly competitive firm employs one worker, it produces 20 units of output, and when it employs two workers, it produces 39 units of output. The firm sells its product for $10 per unit.
4. Are economists for or against regulation?
3. What is the difference between the capture theory and the public choice theory of regulation?
2. State the essence of the capture theory of regulation.
1. What is a criticism of average cost pricing?
3. What is the advantage of the Herfindahl index over the four- and eight-firm concentration ratios?Explain your answer.
2. Suppose that 20 firms are in an industry and that each firm has a 5 percent market share. What is the four-firm concentration ratio for this industry? What is the Herfindahl index?
1. Why does it matter whether a market is defined broadly or narrowly for purposes of antitrust policy?
2. Why do monopolistic competitors operate at excess capacity?
1. How is a monopolistic competitor like a monopolist? How is it like a perfect competitor?
3. Why must a seller be a price searcher (among other things) before he can price discriminate?
2. What is the deadweight loss of monopoly?
1. What are some of the costs, or shortcomings, of monopoly?
4. Why do you think a monopolist is called a price searcher? What is it searching for?
3. Is a monopolist resource allocative efficient? Why or why not?
2. Is a monopolist guaranteed to earn profits?
1. Why does the monopolist’s demand curve lie above its marginal revenue curve?
3. How is a movie superstar like a monopolist?
2. How do economies of scale act as a barrier to entry?
1. “There are always some close substitutes for the product any firm sells; therefore, the theory of monopoly (which assumes no close substitutes) cannot be useful.” Comment.
3. How is a movie superstar like a monopolist?
2. How do economies of scale act as a barrier to entry?
1. “There are always some close substitutes for the product any firm sells; therefore, the theory of monopoly (which assumes no close substitutes) cannot be useful.” Comment.
2. If you see a product advertised on television, does it follow that the product cannot be produced in a perfectly competitive market?
1. In a perfectly competitive market, do higher costs mean higher prices?
4. Suppose two firms produce computer software. Firm A employs a software genius at the same salary that firm B employs a mediocre software engineer. Will the firm that employs the software genius
3. If a perfectly competitive market in long-run equilibrium witnesses an increase in demand, what will happen to price?
2. If firms in a perfectly competitive market want to produce more output, is the market in long-run equilibrium?
1. If firms in a perfectly competitive market are earning positive economic profits, what will happen?
4. Why are market supply curves upward sloping?
3. The layperson says that a firm maximizes profits when total revenue (TR ) minus total cost (TC ) is as large as possible and positive. The economist says that a firm maximizes profits when it
2. In the short run, if a firm finds that its price (P ) is less than its average total cost (ATC ), should it shut down its operation?
1. If a firm produces the quantity of output at which MR MC, does it necessarily earn profits?
4. Suppose the firms in a real-world market do not sell a homogeneous product. Does it necessarily follow that the market is not perfectly competitive?
3. The horizontal demand curve for the perfectly competitive firm signifies that it cannot sell any of its product for a price higher than the market equilibrium price. Why not?
2. Why is a perfectly competitive firm a price taker?
1. “If a firm is a price taker, it does not have the ability to control the price of the product it sells.”What does this statement mean?
3. Firm A charged $4 per unit when it produced 100 units of good X, and it charged $3 per unit when it produced 200 units. Furthermore, the firm earned the same profit per unit in both cases. How can
2. What would the LRATC curve look like if there were always constant returns to scale? Explain your answer.
1. Give an arithmetical example to illustrate economies of scale.
4. Do changes in marginal physical product influence unit costs? Explain your answer.
3. What happens to unit costs as marginal costs rise? Explain your answer.
2. Would a business ever sell its product for less than cost? Explain your answer.
1. Identify two ways to compute average total cost (ATC ).
3. Suppose a marginal cost (MC ) curve falls when output is in the range of 1 unit to 10 units. Then it flattens out and remains constant over an output range of 10 units to 20 units, and then rises
2. “As we add more capital to more labor, eventually the law of diminishing marginal returns will set in.” What is wrong with this statement?
1. If the short run is 6 months, does it follow that the long run is longer than 6 months? Explain your answer.
4. When can a business owner be earning a profit but not covering costs?
3. Is accounting or economic profit larger? Why?

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