Question

(30 points) Based on Pauly-Redisch model, analyze the effects of the following exogenous changes on the optimal number of physicians on a hospital's medical staff. Use a graph to answer each of the questions. (a) (10 points) an increase in the wage rate of the hospital's employees b) (10 points) an increase in the number of persons with health insurance coverage in the hospital's market area

Please solve c

Hypothetical question, there is no data given.

Answer 1

Answer (C): Since you need the answer to only question number ( c) , hence the answer to only Question No. (c) is given below :

In the above diagram, we can see the change in the optimum number of physicians in a hospital�s medical staff being explained. Here, the X axis represents the Cost of per unit staff of the Hospital medical facility and the Y-axis represents the Quantity or the number of physicians demanded in the hospital. �With the Government providing a fixed dollar subsidy to the per unit of the hospital care, the hospitals total cost of running the Hospital management would go down substantially. With every unit of the service being rendered by the Hospital, it will now get a one-dollar subsidy from the Government. This means a huge amount of the cost of running the operation of the Hospital would get saved. In the process, the per unit of cost incurred by the Hospital on the staff would also get reduced. This saved money can now be used to improve the services being offered in the hospital and in implementation of new services in the Hospital. Now this desire from the hospital end would require more of its hospital staff to be

                               In the above diagram, we can see the change in the optimum number of physicians in a hospital’s medical staff being explained. Here, the X axis represents the Cost of per unit staff of the Hospital medical facility and the Y-axis represents the Quantity or the number of physicians demanded in the hospital.

                              With the Government providing a fixed dollar subsidy to the per unit of the hospital care, the hospitals total cost of running the Hospital management would go down substantially. With every unit of the service being rendered by the Hospital, it will now get a one-dollar subsidy from the Government. This means a huge amount of the cost of running the operation of the Hospital would get saved. In the process, the per unit of cost incurred by the Hospital on the staff would also get reduced. This saved money can now be used to improve the services being offered in the hospital and in implementation of new services in the Hospital. Now this desire from the hospital end would require more of its hospital staff to be employed to keep the daily maintenance of the Hospital. This would mean that the demand for Hospital staff would increase and more hospital staff would now be employed in the hospital. From the graph, we can see that with the Government providing a one-dollar subsidy to every unit of the service provided by the Hospital, the cost incurred by the Hospital on the staff goes down and the Quantity demanded for the staff goes up. The demand curve for the hospital staff DD1 thereby shifts to the right and forms a new demand curve D2D3.