ECON 3451 Health Economics
Assignment 1
Instructions: Complete the short answer questions from Chapters 2, 4, and 6 in the textbook. Answer the questions and please submit it in HuskyCT. Submission Options: you could type in word or take a picture of your hand-written answers to submit. Each question is worth 20 points.
1. FGS 2.3 - Using a supply-and-demand graph and assuming competitive markets, show and explain the effect on equilibrium price and quantity of the following:
a. A technological change that reduces the cost of producing X-rays on the market for physician clinic services.
b. Increased graduations of new doctors on the market for physician services.
c. The virtual elimination of smoking in the population on the market for hospital services.
d. A price ceiling placed on physician fees in the market for physician services.
2. FGS 2.8 - Assume that a monopoly firm has a linear demand curve and a constant marginal cost curve. Graph this firm’s optimal output choice before and after a per-unit excise tax is placed on the output. Does the equilibrium price rise by as much as the tax?
3. FGS 4.2 - Consider the following two projects. Both have costs of $5,000 in Year 1. Project 1 provides benefits of $2,000 in each of the first four years only. The second provides benefits of $2,000 for each of Years 6 to 10 only. Compute the net bene- fits using a discount rate of 6 percent. Repeat using a discount rate of 12 percent. What can you conclude from this exercise?
4. FGS 4.5 - Consider a hypothetical three-stage screening test for a cancer with the following rates of detection and costs:
|
Stage |
Number of Cases |
Total Costs |
|
1 |
100 |
$200,000 |
|
2 |
105 |
260,000 |
|
3 |
106 |
300,000 |
a. Calculate the average cost per cancer detected in the three stages.
b. Calculate the marginal cost per cancer detected in the three stages.
c. Suppose that the marginal benefit per treated case is $12,000 per person. What would be the optimal screening, given the costs?
5. FGS 6.4 – Suppose a firm has the production technology show below for Goods 1 and 2.
|
Good 1 |
|
Good 2 |
|
Both |
||||
|
Q1 |
Cost |
|
Q2 |
Cost |
|
Q1 |
Q2 |
Cost |
|
10 |
50 |
|
10 |
60 |
|
10 |
10 |
100 |
|
20 |
100 |
|
20 |
100 |
|
20 |
20 |
180 |
|
30 |
150 |
|
30 |
130 |
|
30 |
30 |
250 |
a. Does Good 1 indicate economies of scale? Why?
b. Does Good 2 indicate economies of scale? Why?
c. Do the two goods indicate economies of scope? Why?