EC248 FINAL|MAIN EXAM WITH ALL
SOLUTIONS VERIFIED
2 vgov't voptions vto vimprove vsocial vwelfare vin vthe vpresence vof vexternalities v- v
vcorrect vanswer- vpigouvian vtax/subsidy
coasian vbargaining
two vconditions vof vthe vcoase vtheorem v- v vcorrect vanswer- v1. vproperty vrights vare
vwell vdefined
2. vtransaction/bargaining vcosts vare vlow
3 vreasons vwhy vphysicians vare vnot vperfect vagents vof vcare v- v vcorrect vanswer- v1.
voverutilization vof vcare
2. vphysician-induced vdemand/ vdefensive vmedicine
3. vracial vdiscrimination
3 vtypes vof vhospital-physician vrelationships v- v vcorrect vanswer- v1. v"physician's
vworkbench": vnot vdirectly vemployed vby vhospital
2. vdirect vemployees
3. vphysician-owned vhospitals
learning-by-doing vhypothesis: v- v vcorrect vanswer- vhigh vvolumes vlead vto vgood
voutcomes
selective-referral vhypothesis: v- v vcorrect vanswer- vgood voutcomes vlead vto vhigher
vvolumes
3 vother vbarriers vto ventry vto vthe vhospital vindustry vother vthan vlimited vcompetition
v- v vcorrect vanswer- v1. vinsurance: vprices vnot vtransparent, vmoral vhazard vfor
vinsured vpatients
2. vgovt voften vsets vprices
3. vemergency vnature vof vhealth vcare vmeans vthat vpatients vare vunable vto vfind vthe
voptimal vfacility
, medical varms vrace vhypothesis v- v vcorrect vanswer- vgreater vcompetition vamong
vhospitals vfor vdoctors vcan vresult vin vredundancy/overconsumption vof vmedical
vtechnologies vthat vwill vresult vin vincreased vcosts vwithout van vimprovement vin
vquality
pros vand vcons vof vbeing va vnonprofit vhospital v- v vcorrect vanswer- vpros: vexempt
vfrom vtaxes, vdonors vrecieve va vtax vdeduction
cons: vcannot vsell vstock, vcannot vdistribute vprofits vto vowners, vrestricted vto vcertain
vcharitable vactivities
4 vtheories vfor vnonprofit vhospital vexistence v- v vcorrect vanswer- v1. valtruistic-motive
vtheory: vsome ventrepreneurs vprefer valtruism vover vprofits
2. vgovernment-failure vtheory: vpolitics vineffectively vhelp vthose vin vneed
3. vasymmetric vinformation: vdonors vtrust vnonprofits vmore vwith vmoney
4. vnonprofits vare vprofits vin vdisguise: v"profits" vare vdistributed vas vhigher vwages vor
vnonmonetary vbenefits
what vare vlast vresort vlaws v- v vcorrect vanswer- vmandate vthat vhospitals vtreat vall
vwho venter vtheir vemergency vrooms
what vis vuncompensated vcare vand vhow vis vit vresolved v- v vcorrect vanswer-
vuncompensated vcare vis vall vhospital vcharges vnot vcovered vby vinsurance vor vOOP
vpayments. vunpaid vfor vhospital vcare vis vpaid vfor vby vcross-subsidization v(rich
vpatients vpay vfor vpoor vpatients)
______ vdrives vthe vdemand vfor vinsurance v- v vcorrect vanswer- vrisk vaversion
risk vaverse vppl vprefer v_____ vover v_____ v- v vcorrect vanswer- vutility vfrom
vexpected vincome,
expected vutility vfrom vuncertain vincome
full vinsurance vis vwhen v___=____ v- v vcorrect vanswer- vIh=Is
actuarially vfair vinsurance vis; v- v vcorrect vanswer- vwhen vthe vpremium=expected
vpayout,
r=pq
asymmetric vinformation: v- v vcorrect vanswer- va vsituation vin vwhich vagents vin va
vpotential veconomic vtransaction vdo vnot vhave vthe vsame vinformation
3 vthings vthat vhappen vwhen vsellers vcan vdetermine vquality vbut vbuyers vcannot v- v
vcorrect vanswer- v1. vall vgoods vthat vsell vwill vsell vfor vthe vsame vprice
2. vthe vbest vgoods vwill vnot vbe vlisted von vthe vmarket
3. vpossibility vthat vgoods vwill vnot vend vup vwith vppl vwho vvalue vthem vthe vmost
adverse vselection: v- v vcorrect vanswer- vthe voversupply vof vlow-quality vgoods,
vproducts, vand vcontracts vthat vresult vfrom vasymmetric vinformation
SOLUTIONS VERIFIED
2 vgov't voptions vto vimprove vsocial vwelfare vin vthe vpresence vof vexternalities v- v
vcorrect vanswer- vpigouvian vtax/subsidy
coasian vbargaining
two vconditions vof vthe vcoase vtheorem v- v vcorrect vanswer- v1. vproperty vrights vare
vwell vdefined
2. vtransaction/bargaining vcosts vare vlow
3 vreasons vwhy vphysicians vare vnot vperfect vagents vof vcare v- v vcorrect vanswer- v1.
voverutilization vof vcare
2. vphysician-induced vdemand/ vdefensive vmedicine
3. vracial vdiscrimination
3 vtypes vof vhospital-physician vrelationships v- v vcorrect vanswer- v1. v"physician's
vworkbench": vnot vdirectly vemployed vby vhospital
2. vdirect vemployees
3. vphysician-owned vhospitals
learning-by-doing vhypothesis: v- v vcorrect vanswer- vhigh vvolumes vlead vto vgood
voutcomes
selective-referral vhypothesis: v- v vcorrect vanswer- vgood voutcomes vlead vto vhigher
vvolumes
3 vother vbarriers vto ventry vto vthe vhospital vindustry vother vthan vlimited vcompetition
v- v vcorrect vanswer- v1. vinsurance: vprices vnot vtransparent, vmoral vhazard vfor
vinsured vpatients
2. vgovt voften vsets vprices
3. vemergency vnature vof vhealth vcare vmeans vthat vpatients vare vunable vto vfind vthe
voptimal vfacility
, medical varms vrace vhypothesis v- v vcorrect vanswer- vgreater vcompetition vamong
vhospitals vfor vdoctors vcan vresult vin vredundancy/overconsumption vof vmedical
vtechnologies vthat vwill vresult vin vincreased vcosts vwithout van vimprovement vin
vquality
pros vand vcons vof vbeing va vnonprofit vhospital v- v vcorrect vanswer- vpros: vexempt
vfrom vtaxes, vdonors vrecieve va vtax vdeduction
cons: vcannot vsell vstock, vcannot vdistribute vprofits vto vowners, vrestricted vto vcertain
vcharitable vactivities
4 vtheories vfor vnonprofit vhospital vexistence v- v vcorrect vanswer- v1. valtruistic-motive
vtheory: vsome ventrepreneurs vprefer valtruism vover vprofits
2. vgovernment-failure vtheory: vpolitics vineffectively vhelp vthose vin vneed
3. vasymmetric vinformation: vdonors vtrust vnonprofits vmore vwith vmoney
4. vnonprofits vare vprofits vin vdisguise: v"profits" vare vdistributed vas vhigher vwages vor
vnonmonetary vbenefits
what vare vlast vresort vlaws v- v vcorrect vanswer- vmandate vthat vhospitals vtreat vall
vwho venter vtheir vemergency vrooms
what vis vuncompensated vcare vand vhow vis vit vresolved v- v vcorrect vanswer-
vuncompensated vcare vis vall vhospital vcharges vnot vcovered vby vinsurance vor vOOP
vpayments. vunpaid vfor vhospital vcare vis vpaid vfor vby vcross-subsidization v(rich
vpatients vpay vfor vpoor vpatients)
______ vdrives vthe vdemand vfor vinsurance v- v vcorrect vanswer- vrisk vaversion
risk vaverse vppl vprefer v_____ vover v_____ v- v vcorrect vanswer- vutility vfrom
vexpected vincome,
expected vutility vfrom vuncertain vincome
full vinsurance vis vwhen v___=____ v- v vcorrect vanswer- vIh=Is
actuarially vfair vinsurance vis; v- v vcorrect vanswer- vwhen vthe vpremium=expected
vpayout,
r=pq
asymmetric vinformation: v- v vcorrect vanswer- va vsituation vin vwhich vagents vin va
vpotential veconomic vtransaction vdo vnot vhave vthe vsame vinformation
3 vthings vthat vhappen vwhen vsellers vcan vdetermine vquality vbut vbuyers vcannot v- v
vcorrect vanswer- v1. vall vgoods vthat vsell vwill vsell vfor vthe vsame vprice
2. vthe vbest vgoods vwill vnot vbe vlisted von vthe vmarket
3. vpossibility vthat vgoods vwill vnot vend vup vwith vppl vwho vvalue vthem vthe vmost
adverse vselection: v- v vcorrect vanswer- vthe voversupply vof vlow-quality vgoods,
vproducts, vand vcontracts vthat vresult vfrom vasymmetric vinformation
