answer questions
Governors State University
Department of Health Administration & Informatics
HLAD 4104 Health Care Economics
Problem Set 2
Total Points: 20
1. Bittergrass Radiology Labs has a fixed amount of radiology equipment. The laboratory
can hire any number of radiology technicians per hour to produce radiographs, which are
displayed below. The relationship between the number of technicians hired per hour and
the number of radiographs produced per hour is shown in the following table. Show the
total and marginal products and indicate at each level of production whether the
production function exhibits increasing, constant, or diminishing marginal productivity.
Please fill in the blanks of the following table. (6 points)
Radiograph
Technician
Radiograph
Produced
Total product
(TP)
Marginal
product (MP)
MP
diminishing/constant/
increasing
10 100
20 260
30 500
40 740
50 940
60 1000
2. Determine how each of the following scenario would change the demand curve for
chiropractic visits and explain why: (6 points)
(a) Yoga practice becomes popular and therefore a decrease in back problems among the
population
(b) Insurance coverage extends to chiropractic visits and such results in a decrease in the
out-of-pocket price of chiropractic visits
(c) The out-of-pocket price of back surgery (a substitute for chiropractic services) gets
higher
(d) The price of radiographs (a complement of chiropractic services) increases
(e) An advertising campaign that makes people more aware of the benefits of
chiropractic care
(f) An increase in the screen time after Pandemic
3. Currently, there is a $1.00 copayment on drugs. The HMO has decided to raise this to
$1.50 per prescription. The cost of a prescription is $6.00, which means the HMO’s
contribution to the total cost will fall from $5.00 to $4.00. Currently, the price elasticity
of demand is about –1.5 for prescriptions, and the HMO members use 4.5 prescriptions
per capita. How much will be demanded after the new copayment is put into effect, and
how much money will this save the HMO? (4 points)
4. The Winter Health Clinic rents a small office in Chicago. Winter pays the building owner
a rent of $8,000 a month, which includes all utilities. It has signed a 5-year lease. Winter
hires a general practice physician at $200 an hour, a nurse at $100 an hour, and a
technician at $50 an hour. Winter assumes that each patient uses $25 in supplies. In
September, the clinic was open for 500 hours, during which all personnel were available
at all times to staff the clinic. During that time, 250 patients were seen. What were
Winter’s total fixed and total variable costs for the month? (4 points)
