1. Mechanics usually have better information about how to fix automobiles than their customers. What sort of problems does this advantage create?

2. Identify a product that is one organization's output and another organization's input.

3. Why has the share of healthcare output produced by hospitals fallen?

4. Explain how adverse selection and moral hazard are different.

5. A radiology firm charges $2,000 per exam. An insurer's allowed fee is 80% of charges. Its beneficiaries pay 25% of the allowed fee. How much does the insurer pay?

6. How much does the beneficiary in question #5 pay?

7. Explain how a decrease in input prices would affect costs.

8. It takes a phlebotomist 15 minutes to complete a blood draw. The supplies for each draw cost $4, and the phlebotomist earns $20 per hour. The phlebotomy lab is designed to accommodate 20,000 draws per year. Its rent is $80,000 per year. What are the average and incremental costs of a blood draw when the volume is 10,000?

9. How would each of the following changes affect the demand curve for acupuncture:

10. Why is the demand for an individual firm's healthcare products usually elastic?

11. Suppose the market equilibrium for immunizations is $40 and the volume is 25,000. What sort of shift in supply or demand would reduce both prices and sales volumes?

12. A clinic has $1 million in revenues and $950,000 in costs. What is its operating margin?

13. Your dental clinic provides 3,000 exams for private pay patients and 1,000 exams for members of the UMW. Your fixed costs are $50,000 and your incremental cost is $40. The UMW has negotiated a fee of $50. Is it profitable to treat members of the UMW?

14. Describe some healthcare situations in which an agent has taken advantage of a principal.

15. Switching from one anesthesia drug to another reduces costs by $100 per patient. What additional information do you need to do a cost-minimization analysis?

16. A vaccine costs $200 per patient. Administration of the vaccine to 1,000 people is expected to increase the number of pain-free days for this population from 360,000 to 362,000. Calculate the cost per additional pain-free day due to vaccination.

17. Can you identify a healthcare firm with market power? What characteristics led you to choose the firm that you did?

18. Why would a merger reduce costs?

19. Why would a merger increase markups?

20. Provide an example of an external cost and an external benefit.