Homework 1

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Q2: Problem 3 (Chapter 1 Appendix) on textbook pp. 34 (10%)
Victor Fuchs (1996) lists the following questions in an article in The Wall Street Journal. Identify whether the following questions involve positive or normative analysis. All the questions deal with a Republican plan to reform Medicare, the public health insurance program for the elderly. A. How many Medicare beneficiaries will switch to managed care? B. How much should the younger generation be taxed to pay for the elderly? C. Should seniors who use less care benefit financially, or should they subsidize those who use more care? D. How many Medicare beneficiaries will switch to medical saving accounts? E. What effect will these changes have on utilization?

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F. How much should society devote to medical interventions that would add one year of life expectancy for men and women who have already passed the biblical “three score and ten”? G. Will senior citizens’ choices about types of coverage depend on their health status? H. If the rate of spending growth is reduced to 6 percent from 10 percent a year, what will happen to the growth of medical services?

Q3: Problem 9 (Chapter 2) on textbook pp. 60 (15%)
Explain how a change in each of the following factors would alter the shape of the total product curve for medical care. A. An increase in education. B. An improvement in lifestyle. C. An improvement in the environment.

Q4: Problem 10 (Chapter 2) on textbook pp. 60 (10%)
Some people believe cigarette and alcohol advertisements should be banned completely in the United States. If this were the case, what would likely happen to the shapes of the total and marginal product for medical care?

Q5: Problem 9 (Chapter 3) on textbook pp. 87 (10%)
According to Chase (1993), TPA, a heart drug produced by Genentech Inc., costs ten times more at $2,200 a dose than streptokinase, an alternative heart drug sold by Astra AB and Kabi Farmacia AB of Sweden and by Hoechst AG of Germany. A trial of...
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