222_Exam_2_solutions - ECON 222 Spring 2009 Midterm Exam #2...

Info iconThis preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon
ECON 222 Spring 2009 Professor Boyle Midterm Exam #2 Please read each question carefully. Keep in mind the point values for each problem and allocate your time accordingly. In order to receive full credit, you must show work for all your answers. You have 50 minutes to complete this test. Good luck! 1) Answer the following regarding the market for physicians’ services: a. (8 points) Draw a graph of the optimal short run production choice for one physician’s practice in this market. Label all curves, axes, and any economic profits. 1
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
b. (8 points) Suppose that in the long run the physician engages in activities predicted by the supplier-induced demand (SID) hypothesis. Draw a new graph (i.e. do not continue your graph from part a) that illustrates the impact of SID on this market. Carefully label consumer surplus and producer surplus in the presence of SID. 2 P Q D MR MC ATC Q* P* ATC* profits
Background image of page 2
RAND Journal , 1996) use a natural experiment to test for supplier-induced demand in the U.S. Explain the pattern of evidence that they look for in their test. Do they conclude that SID is present in the U.S. physicians market? Gruber and Owings noticed a simultaneous decline in fertility rates and increase in C-section rates in the U.S. from 1970-1982. In order to test whether this correlation was causal, they utilized variation in the change in fertility rates across U.S. states. If SID was present in the market, states with bigger fertility declines should have experienced larger increases in the proportion of Cesarean births. The authors do find a statistically significant causal relationship between the fertility decrease and C-section increase, but they find that SID accounts for only 16-32% of the increase in C-sections during this time period (i.e. there are many other factors contributing to the rise in Cesareans). 3
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 4
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 7

222_Exam_2_solutions - ECON 222 Spring 2009 Midterm Exam #2...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online