Assume that health production is subject to diminishing returns and that each unit of healthcare employed entails a constant rate of iatrogenic (medically caused) disease. Would the product of health function eventually bend downward? Explain.
Suppose you were hired as an adviser to a developing country and you were versed in the theory of production, the historical role of medicine, and the modern-day health production functions studies. Their government seeks advice on the wisdom of a relative emphasis on health and health investment versus other forms of economic investment. What would be your advice?
Contrast technical and allocative efficiency. How can technical and allocative inefficiency in healthcare firms affect patient welfare?
Which of the following types of technological change in healthcare are likely to be cost increasing: (A) threats of malpractice suits cause physicians to order more diagnostic tests on average for a given set of patient symptoms; (B) a new computer-assisted scanning device that enables physician to take much more detailed pictures on the brain: (C) the introduction of penicillin earlier in this century; (D) greater emphasis on preventive care? Discuss.
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