Health Care Economics Problem Set 2

Health Care Economics Problem Set 2

can hire any number of radiology technicians per hour to produce radiographs, which are displayed below. The relationship between the number of technicians hired per hour and the number of radiographs produced per hour is shown in the following table. Show the total and marginal products and indicate at each level of production whether the production function exhibits increasing, constant, or diminishing marginal productivity. Please fill in the blanks of the following table. (6 points)

Radiograph Technician

Radiograph Produced

Total product (TP)

Marginal product (MP)

MP diminishing/constant/ increasing

10 100 20 260 30 500 40 740 50 940 60 1000

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Health Care Economics Problem Set 2

2. Determine how each of the following scenario would change the demand curve for

chiropractic visits and explain why: (6 points) (a) Yoga practice becomes popular and therefore a decrease in back problems among the

population (b) Insurance coverage extends to chiropractic visits and such results in a decrease in the

out-of-pocket price of chiropractic visits (c) The out-of-pocket price of back surgery (a substitute for chiropractic services) gets

higher (d) The price of radiographs (a complement of chiropractic services) increases (e) An advertising campaign that makes people more aware of the benefits of

chiropractic care (f) An increase in the screen time after Pandemic

3. Currently, there is a $1.00 copayment on drugs. The HMO has decided to raise this to $1.50 per prescription. The cost of a prescription is $6.00, which means the HMO’s contribution to the total cost will fall from $5.00 to $4.00. Currently, the price elasticity of demand is about –1.5 for prescriptions, and the HMO members use 4.5 prescriptions per capita. How much will be demanded after the new copayment is put into effect, and how much money will this save the HMO? (4 points)

4. The Winter Health Clinic rents a small office in Chicago. Winter pays the building owner a rent of $8,000 a month, which includes all utilities. It has signed a 5-year lease. Winter hires a general practice physician at $200 an hour, a nurse at $100 an hour, and a technician at $50 an hour. Winter assumes that each patient uses $25 in supplies. In September, the clinic was open for 500 hours, during which all personnel were available at all times to staff the clinic. During that time, 250 patients were seen. What were Winter’s total fixed and total variable costs for the month? (4 points)

• Show the total and marginal products and indicate at each level of production whether the production function exhibits increasing constant or diminishing marginal productivity?,

• Determine how each of the following scenarios would change the demand curve for chiropractic visits and explain why?,

• How much will be demanded after the new copayment is put into effect and how much money will this save the HMO?,

• What were Winter’s total fixed and total variable costs for the month?,

• Explain why each change affects demand in economic terms?