hw4soln - be easy to x in the market? Then, give two...

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HPAM8600: Health Economics UGA College of Public Health Professor Angela Fertig Spring 2010 Homework 4 Solutions 1. Using the theories on non-profits, briefly describe why non-profits might offer higher quality than for-profit firms? Because non-profits answer to donors instead of shareholders, they are more likely to provide quality care if that is the wish of the donors (from contract failure theory). Because non-profits maximize utility instead of profits and they value qual- ity, they are more likely to provide quality care (from QQ theory). Because physicians have more power within a non-profit, there will be higher quality care provided if physicians demand it (from 2-firm theory). 2. Using the example of nurses, why do economists think that shortages should
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Unformatted text preview: be easy to x in the market? Then, give two reasons why there is a nursing shortage. Shortages should disappear if the market is allowed to adjust. If the wages oered are higher, more nurses should decide to work (or people will decide to become nurses) and the shortage will go away. Possible reasons for nursing shortage: Not enough nursing schools/faculty Hospitals have monopsony power over the nurse market. Because they aect the wage, it is very costly to hire an additional nurse. As a result, they employ a small number of nurses at a modest wage. However, at that wage, it appears that they should want more nurses, but no additional nurses will enter the market at that modest wage. Thus, it appears that there is a shortage....
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