QUESTION 1.
You are at the tail end of your career, working as a high priced consultant for a firm that you are partner in. The Freedmanian Congress is in the process of overhauling the Freedmanian Health Care system and they have hired you to assist them. They would like you to analyze the impact of expanding the demand for health care services while at the same time reducing payments to health care providers.
Task 6: Using supply and demand curves, provide your analysis.
QUESTION 2.
A firm's long-run total cost curve is TC(Q)=1000Q. Derive the equation for the corresponding long-run average cost curve, AC(Q). Given the equation of the long-
run average cost curve, which of the following statementsis true?
a) The long-run marginal cost curve MC(Q) lies belowAC(Q) for all positive quantities Q.
b) The long-run marginal cost curve MC(Q) is the sameas the AC(Q) for all positive quantities Q.
c) The long-run marginal cost curve MC(Q) lies abovethe AC(Q) for all positive quantities Q.
d) The long-run marginal cost curve MC(Q) lies belowAC(Q) for some positive quantities Q and above theAC(Q) for some positive quantities Q.
QUESTION 3.
National Hospital is the only employer of nursesin the country of Castoria, and it acts as a profit-maximizing monopsonist in the market for nursing labor.The marginal revenue product for nurses is W=50-2N, where w is the wage rate and N is the number ofnurses employed (measured in hundreds of nurses).Nursing services are provided according to the supplyschedule w=14+2n
a) How many nurses does National Hospital employ, andwhat wage will National pay its nurses?
b) What is the deadweight loss arising from monopsony?