Question

1) Why do firms self-insure? Explain.

2 ) What are the likely consequences of the following events in the U.S. market for cosmetic surgery? Does the supply curve or the demand curve shift? In which direction? State whether the equilibrium price and quantity increase, decrease, or stay the same.

a. Health insurance coverage is expanded to cover all elective procedures, such as tummy tucks, nose jobs, and liposuction

b. Personal finance companies start a nationwide lending program for cosmetic procedures not covered by health insurance.

c. Medical malpractice insurance premiums increase for plastic surgeons.

3. The idea behind the production function for health is that medical care, when combined with other inputs and a person’s own time, produces good health. What is the marginal contribution of medical care to the production of health in the United States?

4. Describe what is wrong with the following statement made by an uninformed (hypothetical) politician, “For-profit nursing homes are bad because the owners charge whatever price they want.”

5. What are two-three reasons that are claimed to account for the high reported profits of pharmaceutical companies? Do you think drug companies earn excessive profits?

  

Answer 1