1. Congressional studies report that Medicare payments fall 11 percent below the cost of treating patients while private insurance patients pay 29 percent more than cost. This phenomenon is called

a.   price increasing.

b.   the Medigap.

c.   cost-shifting.

d.   cost-plus pricing.

2. Economies of scale exist when

a.   long-run average costs decline as output increases.

b.   long-run average costs are constant.

c.   long-run average costs increase as output increases.

d.   short-run average costs increase.

3. The dominant factor affecting medical care delivery and finance in the 1960s was

a.   the Hill-Burton Act.

b.  prospective payment for hospitals.

c.   the creation of Medicare and Medicaid.

d.   the explosive growth of managed care.

4. The dominant factor affecting medical care delivery and finance in the 1980s was

a.   the Hill-Burton Act.

b.  prospective payment for hospitals.

c.   creation of Medicare and Medicaid.

d.   ERISA.

5. Using the physician-control model to explain hospital behavior leads to which of the following conclusions?

a.   Other medical inputs tend to be over used to maximize physicians’ productivity.

b.   The use of operating rooms will be maximized with little excess capacity.

c.   Physicians will strive to utilize the nursing staff efficiently.

d.   All of the above are conclusions of the physician-control model.

Short Answer

Assume there are five hospitals in Stony Brook and each has 100 beds.

What is the Herfindahl-Hirschman Index (HHI)? (1 pt)

ANS:0.2

Short Answer

Suppose the aggregate demand curve for nurses in Stony Brook is Nd = 300 – 5w, where w is the hourly wage rate for nurses and Nd is the number of nurses demanded in Stony Brook. The          supply of nurses is NS = 5w – 50, where NS is the number of nurses supplied to the market. In     addition, the government publicly announces that Stony Brook needs to hire 125 nurses in order to provide good-quality hospital care. Meanwhile, the government regulates the wage rate for     nurses at w = 40.

Use Economics approach to calculate the nursing shortage or surplus under the current regulated wage rate. (2pt)

Ans: Nd=100, but Ns=150. There is a nurse surplus which is equal to 50.

Calculation Problem

Based on the figure above, Dp  and MRp are demand curve and marginal revenue curve for the market in which a physician can set his or her fee (private market). PM  is the price for the Medicaid market. MC is the marginal cost cure faced by the physician.

What is the number of patients from private market? (1 pt)

What is the number of patients from Medicaid market? (1 pt)

What is the price of the private market? (1 pt)

You should show me how you get the answers. If not, you won’t get any credit.