SOLUTIONS_to_Final_Exam_Summer'11_revised_Dec_16th_2011

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Unformatted text preview: 1 Department of Economics Intermediate Microeconomics S4211 Columbia University Summer 2011 SO LUTI ONS T O FINA L E X A M (Arkona c ) In s tru c tion s 1. Do not turn this page until so instructed. 2. Please put your answers in the space provided under each question. 3. This exam has total of 100 points. 4. You are permitted to use a simple calculator. No computers, wireless, or other electronic devices without prior permission. You may not share resources with anyone else. 5. Some questions ask you to draw a real-world judgment in a problem of practical importance. The quality of that judgment counts. For example, consider the question: It is 10 o F outside. In your judgment, why are so many people wearing heavy coats? The answer, To stay warm would receive more points than the answer, Because they are fashion- conscious. 6. Put your nam e and Columbia UNI on th e c ov e r of th e e xam . Nam e : ___________________________________________________ UNI: ____________________________________________________ 2 Qu e s tion 1 [21 pt s ]: The market demand for medical checkups per day, Q M is Q M =25(198+n p /20,000-P M ), where n p is the number of patients per day who are at least 40 years old, and P M is the price of a checkup. The market demand for the number of dental checkups per day, Q D , is Q D =100(150 P D )/3, where P D represents the price of a dental checkup. The long-run market supply of medical checkups is Q M = 50P M 10P D . The long-run market supply of dentists is Q D =50P D 10P M . The supplies are linked because people decide on a medical and dental career based in part on relative earnings. a . If n p =40,000, what is the equilibrium number of medical and dental checkups? What are the equilibrium prices? b . How would an increase in n p affect the equilibrium price of medical checkups? You may answer this by determining dP M /dn p . c . Suppose that, instead of determining the price of medical checkups by a market process, large health insurance companies set their reimbursement rates, effectively determining all medical prices. A medical doctor receives $35 per checkup from an insurance company, and a patient pays only $10. How many checkups do doctors offer collectively? What is the equilibrium quantity and price of dental checkups? 2 Qu e s tion 1 [21 pt s ]: The market demand for medical checkups per day, Q M is Q M =25(198+n p /20,000-P M ), where n p is the number of patients per day who are at least 40 years old, and P M is the price of a checkup. The market demand for the number of dental checkups per day, Q D , is Q D =100(150 P D )/3, where P D represents the price of a dental checkup. The long-run market supply of medical checkups is Q M = 50P M 10P D . The long-run market supply of dentists is Q D =50P D 10P M . The supplies are linked because people decide on a medical and dental career based in part on relative earnings....
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SOLUTIONS_to_Final_Exam_Summer'11_revised_Dec_16th_2011 - 1...

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