Topic 7: Labour supply for medical professionals

Question 1

How can there be both a shortage of nurses and low wages for nurses?

Answer 1

Because there are many nurses, but few hopsitals. As a result, there may be a monopsony effect, which explains the shortage and low wages

Question 2

What are the conditions necessary for monopsony?

Answer 2

a. An upward sloping supply curve (also called average factor cost curve)
b. Monopoly power for the buyers

Question 3

Show a graph that demonstrates the effect of monopsony

Answer 3

x

Question 4

How can monopsony’s be tacked?

Answer 4

a. Direct wage subsidy to nurses
b. Promite unionisation
c. increase nurse skill level (increases market power)
d. alter legislation that restricts tasks nurses can perform

Question 5

What is cost shifting?

Answer 5

When higher prices are charged to one group of consumers to offset lower payments from another. Only profitable if firms were not already charging the profit maximising price

Question 6

What is the Thomas McGuire model for doctor supply?

Answer 6

The model (McGuire 2008) treats doctors as quantity setters - they decide the quantity of services for the patient. The patient themselves can accept or reject the 'offer' - or rather recomendation of services.
The doctos will set quantity such that it gives a minimum net befinit to patients, assuring they will not reject the reccomendation. They will also maximise profits. The price may be determined by legislation, other factors, or just the doctor in question.

Question 7

Give a graph demonstrating the McGuire (2000) model for doctor supply. Show the net benifit area, and the price & quantity set

Answer 7

x

Question 8

Explain supplier induced demand theory

Answer 8

In seeking to maintain profits, suppliers will abuse their principal-agent relationship to ‘induce demand’, raising their profits. The SID model assumes there is soem disutility to inducing demand, so suppliers will only do it when they see a fall in income

Question 9

Show a graph explaining what happens in the SID model after an increase in supply

Answer 9

Supply increases from S’ to S’’. But to maintain income, suppliers then induce demand from D’ to D’’. Thus price increases to an even higher level, maintain the income level of the suppliers.

Question 10

What are the costs of Malpractise law?

Answer 10

• cost of malpractise insurance
• the practise of defensive medicine, prescribing services that are not net benificial because it decreases the chance of a malpractise suit against the practitioner
• doctors / hospitals avoiding risky patients
• doctos / hospitials avoiding risky procedures

Question 11

What have economic investigations into malpractise yeilded?

Answer 11

• Malpractise law suits increase ceasarian section rates for indervidual doctors
• Malpractise law increases caesarian section rates on average

Question 12

What are the theree payment methods for doctors?

Answer 12

• Salaries
• Fee for service (FFS)
• Cpaitation (fixed payment per patient)