Define price fixing, boycotting, exclusive dealings contracts, tying contracts, and market allocations.
Define price fixing, boycotting, exclusive dealings contracts, tying contracts, and market allocations.
UHV-SBA
HCAD 4354 Economics for Healthcare
Homework 3
The homework covers the textbook Ch 9-10. You may discuss the questions with
classmates. However, it must be your individual work. Copying answer from others
will violate ACADEMIC HONESTY policy to cause a failing grade. Please show
the derivation process and limit your answers within 5 pages. Highlight the answer
for each question in MS Word format. No cover sheet is required. If you don’t know
how to edit math notations, just explain the process. Please submit you solution file as an
attachment.
Q1: (Chapter 9) (15%)
Minnesota and Tennessee, among other states, have recently begun to tax the sales of
health care providers, such as hospitals and physicians. Analyze the incidence of this
sales tax for three different scenarios:
(a) The demand for medical services is completely inelastic while the supply curve is
positively sloped to the right;
(b) the demand curve is downward sloping and supply is completely inelastic (for this
case, it is best to shift the demand curve downward by the amount of the per-unit tax);
(c) The demand curve is downward sloping and the supply curve is positively sloped.
When does the consumer or health care provider pay a larger portion of the tax? Why?
Q2: (Chapter 9) (20%)
Define price fixing, boycotting, exclusive dealings contracts, tying contracts, and market
allocations.
Q3: (Chapter 9) (20%)
Given the graph of External Costs of Cigarette Smoking (on Slide 7, Lecture Chapter 9), if
the government imposes an unit sales tax (e.g. $1 per pack), please answer the following
two questions:
(a) Which curve (D or S) will shift? Leftward or rightward?
(b) After the curve shift, will the new market equilibrium price and quantity help to reduce
the gap between MPB and MSB?
Q4: (Chapter 10) (15%)
In 1983, Congress adopted the prospective payment system (PPS) to compensate
hospitals for medical services. Prior to that point, hospitals were paid on a retrospective
basis. Provide the economic justification for such a move.
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