chapter 6

Question 1

T or F

Understanding economic behavior in the health care is straightforward because of the simple nature of health care as a service or product.

Answer 1

F
Understanding economic behavior in the health care is not straightforward because of the complex nature of health care as a service or product

Question 2

Production Concept in Health Care

Answer 2

• What services (goods) should be given priority?
• How much of which services (goods) should be produced first?

Question 3

The essence of Production Concept in Health Care is to buy ______, use them to produce outputs, and eventually sell the _______.

Answer 3

inputs, output

Question 4

What is the transformation of inputs into outputs.

Answer 4

• Production

Question 5

• These are the factors of production (Land, Labor, Capital, Entrepreneurship)

Answer 5

Inputs of Production

Question 6

Factors of Production

Answer 6

(Land, Labor, Capital, Entrepreneurship)

Question 7

What is the result that has been created by the inputs

Answer 7

• Output

Question 8

Two Types of Outputs

Answer 8

1. Goods
2. Services

Question 9

T or F

The quality and quantity of inputs have a direct impact on the quality and quantity of output.

Answer 9

T

Question 10

T or F

Output can also be input

Answer 10

T

Question 11

EX: Fresh Graduates of Nursing Courses

Answer 11

Output can also be input

Question 12

Classification of Factors of Production

Answer 12

1. Fixed Factor
2. Variable Factor

Question 13

remains constant regardless of the volume of production.

Answer 13

Fixed factor

Question 14

changes in accordance with the volume of production.

Answer 14

Variable factor

Question 15

2 ASPECTS OF THE PRODUCTION DECISION

Answer 15

• The ability to Produce
• The willingness to produce

Question 16

prescribed by resources availability (related to resource costs) and state of technology.

Answer 16

• The ability to Produce -

Question 17

prescribed by the profit incentives (production benefits relative to production cost)

Answer 17

• The willingness to produce -

Question 18

It is a technical name given to a relationship between quantities of various inputs used and the maximum output that can be produced with those inputs used per unit of time

Answer 18

THE PRODUCTION FUNCTION

Question 19

THE PRODUCTION FUNCTION is a technical name given to a relationship between ____and _______ that can be produced with those inputs used per unit of time.

Answer 19

quantities of various inputs used and the maximum output

Question 20

Production Function

Answer 20

Y=y(L,K) or Y=f(L,K)

Question 21

the quantities of one or more production factors cannot be changed.

Answer 21

In the short-run

Question 22

we will have fixed input(s)

Answer 22

short run

Question 23

all factors of production can be changed.

Answer 23

LONG-RUN -

Question 24

refers to the total amount of medical services or goods produced.

Answer 24

total product

Question 25

What refers to the number of surgical procedure that can be ‘produced’ or performed given the fixed medical equipment and varying number of surgeons.

Answer 25

total product

Question 26

It is defined as the output per unit of a particular product.

Answer 26

Average Product

Question 27

It is obtained by dividing total product (TP) by its corresponding units of labor.

Answer 27

Average Product

Question 28

Average Product Formula

Answer 28

AP= Total Product/ Number of labor Inputs

Question 29

it measures the productivity of labor (surgeon) in terms of how much, on average, each surgeon can perform.

Answer 29

Average Product

Question 30

It is the extra product or output added by 1 extra unit of that input while other inputs are held constant.

Answer 30

marginal product of input

Question 31

Formula of Marginal Product

Answer 31

MP= change in Total Product/ Change in labor Input

Question 32

It does not reach negative because total product does not have negative values.

Answer 32

Average product

Question 33

the slope of the total product curve.

Answer 33

* Marginal Product (MPl)

Question 34

It usually rises first, reaches its maximum, then begins to decline.

Answer 34

* Marginal Product (MPl)

Question 35

When the _______reaches its saturation, marginal product is zero

Answer 35

total product curve

Question 36

When the total product curve reaches its saturation, marginal product is _____

Answer 36

zero

Question 37

at the declining portion of the total product, the marginal product is _______

Answer 37

negative.

Question 38

-the average product increases as labor increases;

Answer 38

When MP > AP

Question 39

-the average product is constant;

Answer 39

When MP = AP

Question 40

the average product will fall as labor input increases.

Answer 40

When MP < AP

Question 41

The _________is a theory in economics that predicts that after some optimal level of capacity is reached, adding an additional factor of production will actually result in smaller increases in output.

Answer 41

law of diminishing marginal returns

Question 42

* it is usually used for short-run when one variable is fixed.

Answer 42

law of diminishing marginal returns

Question 43

* As more and more input such as labor (surgeon) is added to the fixed amount of equipment (operating apparatus) the labor has less and less of other factors to with.

Answer 43

Law of diminishing marginal returns

Question 44

* The operating room gets crowded, the operating equipment is insufficient and the job done (operations performed) becomes less insignificant.

Answer 44

Law of diminishing marginal returns

Question 45

starts at the origin until the highest portion of the average product.

Answer 45

Stage 1 of production

Question 46

goes from the highest portion of the average product until marginal product is zero.

Answer 46

Stage II of production

Question 47

begins where marginal product is zero until its negative range.

Answer 47

Stage III of production

Question 48

-Greek word, ‘iso’ meaning _________and ‘quant’ is short for _____

Answer 48

‘equal’ , quantity.

Question 49

is a curve which shows all possible combinations of inputs that yield the same level of output.

Answer 49

Isoquant

Question 50

A shift of an isoquant to the right means that there is _________in production, while a shift to the left denotes ________ in production.

Answer 50

an increase , a decline

Question 51

CHARACTERISTICS OF ISOQUANT

Answer 51

1. Isoquants further from the origin represent greater output levels. 2. Isoquants do not intersect. 3. Isoquants are usually convex to the origin. 4. Isoquants are negatively sloped.

Question 52

Isoquants further from the origin represent ____.

Answer 52

greater output levels

Question 53

Isoquants do not _____

Answer 53

intersect.

Question 54

. Isoquants are usually _____ to the origin.

Answer 54

convex

Question 55

This manifest that the slope of the isoquant gets flatter down along the curve.

Answer 55

. Isoquants are usually convex to the origin.

Question 56

Slope of isoquant

Answer 56

Diminishing Marginal Rate of Technical Substitution (DMRTS)

Question 57

Isoquants are _______sloped.

Answer 57

negatively

Question 58

it specifies how much units of capital (K) that a firm should give up to obtain additional units of labor (L)

Answer 58

Marginal Rate of Technical Substitution (MRTS)

Question 59

MRTS formula

Answer 59

MRTS= - Change in K/ Change in L or MPL/ MPk

Question 60

-Greek word, ‘iso’ meaning ‘equal’ and ‘cost’

Answer 60

ISOCOST

Question 61

is a straight line showing the different combinations of capital (K) and labor (L) that a firm (hospital) can purchase or hire given his total outlay and the factor prices.

Answer 61

Isocost

Question 62

An isocost that shifts to the _____ indicates an increase in total outlay. While a_______denotes a decrease in total outlay.

Answer 62

right, leftward shift

Question 63

This is shown by the point of tangency between isocost and isoquant.

Answer 63

Optimal Choice of Input Combination