ECO 610 - Midterm - Fall 2016 - Share.docx - ECO 610 Midterm Exam Name Section A ANSWER ALL QUESTIONS IN THIS SECTION 1(15 pts The production function

# ECO 610 - Midterm - Fall 2016 - Share.docx - ECO 610...

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ECO 610 Midterm Exam Name:________________________________ October 18, 2016 Section A: ANSWER ALL QUESTIONS IN THIS SECTION 1. (15 pts.) The production function for general healthcare is provided below: Y - HealthCare X – Inputs that produce Healthcare Y = F (Hospital, Doctors, Nurses, MRI Scanner, Beds, Surgery Suites, Medication, among others) a) Group the above inputs under the correct category below Variable Inputs Fixed Inputs Answer: Doctors Hospital Nurses MRI Scanner Beds Surgery Suites Medication b) Explain diminishing marginal returns in relation to the healthcare production function Answer: →To improve healthcare, one can increase inputs. →In short-run, as variable inputs are increased, healthcare improves initially. →However, continuing adding the variable inputs to the fixed input will lead to all inputs performing below average. c) Using the above information, how can Healthcare benefit from economies of scale? Explain Answer: →Spread the fixed costs across several variable inputs. →If demand increases, can build another hospital in the long-run. →Average cost decreases. d) Can healthcare (or in your area of practice) run in to a scenario of diseconomies of scale? Personal opinion
2. (10 pts.) Your sister is deciding whether to enroll in the Gatton College’s one- year daytime MBA program. Tuition for this program would be \$30,000, and textbooks and other supplies would be \$2,000. She would have to attend class

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