HE+HW1+-+Spring+2010

HE+HW1+-+Spring+2010 - Department of Economics Health...

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Department of Economics Prof. Derek DeLia Health Economics 220:316:01 Spring 2010 HOMEWORK #1 This assignment is for practice purposes only. It will not be graded or collected. QUESTION 1 : List and briefly explain 5 reasons for the rising trend in U.S. health spending over the past few decades. QUESTION 2 : According to an influential study by Joseph Newhouse, what was the single most important factor driving the rise in U.S. healthcare spending from 1950-87? Why was it labeled a “residual” factor? QUESTION 3 : a. Briefly describe the design of the Dartmouth Atlas Project. b. What does it tell us about the relationship between healthcare spending and outcomes in the U.S.? QUESTION 4 : Suppose a new test is developed for the early detection of prostate cancer. Early detection increases the survival rate for those who have the cancer. The test costs $500 to administer. Assume the risk of prostate cancer increases with age. a. What does it mean to expand the use of this test on the extensive margin? b. Explain how this test may involve diminishing marginal returns. c. Use a diagram to show the socially optimal number of tests performed under the assumption of diminishing marginal returns. d. How does your answer to part c depend on the value of a statistical life? e. How would your answer to part c change if the test cost $300 to administer? f. How would your answer to part c change if the test involved an iatrogenic risk that was the same for everyone? QUESTION 5
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HE+HW1+-+Spring+2010 - Department of Economics Health...

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