代写Econ 5860: Health Economics Autumn 2024 Problem Set 3代写数据结构程序

Econ 5860: Health Economics

Autumn 2024

Problem Set 3

A. True/False Explain. Indicate whether each of the following statements is true or false and then explain why you think this. Include in your explanation any pertinent institutional details  and economic reasoning (including appropriate graphs and equations). Please provide concise, clear answers with minimal irrelevant detail. Explanation is required.  [5 points each]

1.   In the Rothschild-Stiglitz model, more risk-averse consumers have flatter indifference curves, all else equal.

2.   Suppose there is a separating equilibrium in the Rothschild-Stiglitz model. If everyone becomes more risk-averse, this can cause the equilibrium to collapse.

3.   Policymakers in at least 14 states in the US have in recent history passed laws called

“community-rating” laws. The idea of these laws is that, since individual private health insurance markets don’t seem to function very well, leaving many older and sickly people unable to purchase affordable insurance, community rating laws impose restrictions on prices that insurance companies are allowed to charge. Consider a community rating law that forces insurance companies to charge the same price to all individuals (and forces insurance companies to sell insurance to anyone who is willing to pay the chosen price).

True or false: the Rothschild-Stiglitz model suggests that this law will help old and sickly people gain access to insurance.

4.   Empirical evidence suggests that the primary reason why there is a physician shortage in the US is because wages are prevented from adjusting upward to allow the competitive market to reach an equilibrium.

B. Analytical Problems

5.   Consider the basic Rothschild-Stiglitz model with asymmetric information and two types of consumers. A policymaker who has taken this class suggests that it might bebeneficial to impose a flat tax on healthy people and distribute the tax revenue to sick people, providing partial insurance to people.

a.   [5 points] Since the tax will only offer partial insurance, there will still be a

private competitive market for additional insurance. Will a separating equilibrium be possible in the insurance market if this tax is implemented? Draw a diagram to justify your answer.

b.   [4 points] After the tax is implemented a recession hits and a new policymaker decides to make up for a tax revenue shortfall by expanding the tax to include sick people as well as healthy people. Will a separating equilibrium be possible in the insurance market under this policy?

6.   Physician Supply: The supply of physician office visits is given by QS=40P-1000, and demand for physician office visits is QD=6000-60P.

a.   [2 points] If the market is perfectly competitive, what are the equilibrium price and quantity?

b.   [3 points] Suppose there is an entry barrier that prevents new physicians from  entering the market, which limits QS = 900.  What is the market price given this entry barrier?

c.    [6 points] Congress is deciding whether to pass a law that will eliminate this

barrier to entry, returning the market to competitive equilibrium. What is the maximum amount of money the physician trade union would be willing to spend on congressional lobbyists to keep the barrier to entry in place?  Assume that the objective of the trade union is to maximize total producer surplus.

Short Answers

7.   [6 points]  Dranove and Wehner (1994) argue that the statistical evidence used to

support the supplier-induced demand hypothesis is invalid because they find that the same statistical techniques also suggest that obstetricians induce demand.  Briefly explain the supplier-induced demand hypothesis and why this finding by Dranove and Wehner is evidence against the hypothesis.