chapter 7 Flashcards
(77 cards)
1
Q
Type of Organizations
A
- Not-for-profit organizations
- Nonstock corporations
2
Q
typically organized as “non-stock corporations” registered under the Corporation Code.
A
- Not-for-profit organizations (hereinafter “NPOs”)
3
Q
- Not-for-profit organizations (hereinafter “NPOs”) are typically organized as “non-stock corporations” registered under the WHAT
A
Corporation Code.
4
Q
WHAT can be formed for charitable, religious, educational, professional, cultural, fraternal, literary, scientific, social, civic service, or similar purposes, such as trade, industry, agricultural and like chambers, or any combination thereof (Section 88, Corporation Code)
A
- Nonstock corporations
5
Q
- Nonstock corporations can be formed for WHAT, or any combination thereof (Section 88, Corporation Code)
A
- Nonstock corporations can be formed for charitable, religious, educational, professional, cultural, fraternal, literary, scientific, social, civic service, or similar purposes, such as trade, industry, agricultural and like chambers, or any combination thereof (Section 88, Corporation Code)
6
Q
In tax laws
A
- Non-stock corporations
- Civic leagues or organizations
- Non-stock, non-profit educational institutions (Section 30(e), (g), and (h), Tax Code).
7
Q
WHAT organized exclusively for religious, charitable, scientific, athletic or cultural purposes, or for the rehabilitation of veterans;
A
- Non-stock corporations
8
Q
WHAT operated exclusively for the promotion of social welfare;
A
- Civic leagues or organizations
9
Q
(Section 30(e), (g), and (h), Tax Code).
A
- Non-stock, non-profit educational institutions
10
Q
- People commonly assume that WHAT are firms organized to provide charitable goods or community services and that they obtain their revenues largely from donations.
A
nonprofits
11
Q
- Healthcare nonprofits obtain more than HOW MUCH of their revenues from “sales and receipts.”
A
90 percent
12
Q
- Healthcare nonprofits obtain more than 90 percent of their revenues from WHAT AND WHAT
A
“sales and receipts.”
13
Q
- In economic language, the important distinction of the nonprofit is the WHAT
A
non-distribution constraint.
14
Q
- This means that no one has a legal claim on the WHAT, the difference between the revenues and its costs.
A
nonprofit’s residual
15
Q
Distinctions between nonprofit and for profits
A
- First, nonprofits are exempt from corporate income taxes and often from property and sales taxes.
- Second, donations to nonprofits receive favorable tax treatment.
16
Q
3 types of firms/economic institutions
A
- Private Profit-making Firms
- Government
- Voluntary Nonprofit Enterprises
17
Q
- We view a perfectly competitive industry under certain circumstances as economically efficient, and empirical data suggest that competition often fosters growth.
A
Burton Weisbrod’s analysis (1975)
18
Q
- Under this account, we need government enterprises only in cases where competitive markets fail.
A
Burton Weisbrod’s analysis (1975)
19
Q
- As this theory unfolds, we need nonprofits, in turn, when government enterprise also fails.
A
Burton Weisbrod’s analysis (1975)
20
Q
T OR F
- Most consumer goods provide private benefits and little or no externalities.
A
T
21
Q
WHAT is an uncompensated direct effect of the production or consumption of a good on persons other than the producers or consumers.
A
externality
22
Q
EXAMPLE CASES IN EXTERNALITIES AND EXPLAIN
A
Case: Hamburger
Case: Influenza Vaccination
- This good entails a private benefit: The purchaser will less likely suffer from influenza.
- In addition, there is an external benefit to others because the purchaser will be less likely to infect others.
23
Q
T OR F
- Free markets tend to overproduce goods for which there exist significant external benefits.
A
F
- Free markets tend to underproduce goods for which there exist significant external benefits.
24
Q
- The WHAT is the sum of the private benefits and the external benefits to the community.
A
benefit to society
25
* Because demand will represent only the private benefits, it will understate society’s benefits and give a false or inadequate signal to the market. The market then produces less than the amount that would maximize net social benefits. This is economically inefficient, and we call this situation a case of WHAT
market failure.
26
T OR F
introducing the concept of Externality, we have proven that markets fail.
T
27
t or f
The existence of a large externality raises the possibility of a role for market.
f
The existence of a large externality raises the possibility of a role for government.
28
t or f
* If we recognize that markets may fail, we must recognize that governments too may fail to act efficiently.
t
29
* The vaccination is a private good with an external benefit, but it has WHAT aspect.
PUBLIC good
30
characteristics of a PURE PUBLIC GOOD?
Nonexcludable
Nonrival
31
means that people cannot be economically excluded from consuming the good even if they refuse to pay for it.
Nonexcludable
32
means that one person can consume the good without depleting it for others.
Nonrival
33
JUSTIFY THE PUBLIC GOOD CAHARACTERISTICS OF NATIONAL DEFENSE
* This defense system would be nonexcludable because those living in the country would benefit whether they paid or not.
Likewise, the defense system is nonrival because the protection of one more individual does not diminish the defense enjoyed by others.
34
* Why is the Government the one providing this public good?
* If private enterprise tried to attempt to provide defense, it would find many citizens choosing to be free riders.
35
WHAT is a person who consumes the public good but refuses to pay.
* A free rider
36
T OR F
* Only government has the power to force consumers to pay.
T
37
* A donation to the health of others has the characteristics of both a public good and a private good.
Charitable Donations
38
which argues that donations to public goods motivate the donor as both private and public goods. If you donate toward the health of a poor person, you may get a “warm glow”
* Richard Steinberg’s (1986, 1987)
39
If you donate toward the health of a poor person, you may get a WHAT
“warm glow”
40
an increase in utility from the act of giving; Arrow, 1975; Andreoni, 1990
* WARM GLOW:
41
* WARM GLOW: an increase in utility from the act of giving; WHO
Arrow, 1975; Andreoni, 1990
42
T OR F
* The warm glow may come from the act of donating or simply from the pleasure in knowing that a suffering person’s health improved.
T
43
other charitably minded persons will also have this pleasure, whether or not they have donated. They are WHO receive an external benefit free. The charity market then provides too little charity to be efficient.
free riders
44
Models of nonprofit hospital behavior
1. The Quality-Quantity Nonprofit Theory
2. The Profit-Deviating Nonprofit hospital
3. The Hospital as Physicians’ cooperative
45
1. The Quality-Quantity Nonprofit Theory
First task:
Identify the objective of the hospital decision makers.
46
1. The Quality-Quantity Nonprofit Theory
2 OPTIONS
i. Utility-maximization
ii. Profit-maximization
47
Who are the decision makers?
i. Board of Trustees
ii. CEO or Hospital Administrator - the trustees’ decision-making agent
iii. Physician Staff - the arbiters of medical decision-making
48
- the trustees’ decision-making agent
ii. CEO or Hospital Administrator
49
the arbiters of medical decision-making
iii. Physician Staff -
50
* The utility maximizing model, most clearly approximating the WHAT, was proposed by WHO
altruistic firm
Joseph Newhouse (1970).
51
* For WHAT, the hospital’s objective was to maximize the utility of the decision makers.
Newhouse
52
the hospital’s preferences are defined over quantity and quality of output.
* In Newhouse’s model,
53
1. The Quality-Quantity Nonprofit Theory
a. Quantity of Output
b. Quality of Output
54
WHAT could be measured in several ways, but assume we measure it by the number of cases treated.
* Quantity of output
55
* Output quality can entail many different characteristics of the care provided.
b. Quality of Output
56
* Some top decision makers may value the quality or beauty of the hospital structure, and others may emphasize expertise of the physician or nursing staff.
b. Quality of Output
57
* Still others may emphasize prestige in the medical community, and yet others may stress the quality of the tender loving care provided.
b. Quality of Output
58
* The hospital selects a combination of quantity and quality that maximizes utility.
The Quantity-Quality Frontier
59
which is the sum of patient generated revenues plus donations equal the hospital’s costs.
budget constraint,
60
The Quantity-Quality Frontier FACES WHAT AND WHAT
the budget constraint
the nondistribution constraint.
61
occurs at a point of tangency between the frontier and the highest indifference curve attainable.
* The constrained utility maximization point
62
Attribute: Re invest profits in hospital or return to owners
FP
63
Attribute: Pay corporate income and local property taxes
FP
64
Raise capital from the issuance of stock
FP
65
Borrow at tax-exempt rates
NFP
66
Receive tax deductible donations
NFP
67
Provide community benefit
Charity care, emergency care, health education
FP, NFP
68
They (Private Profit-making Firms, Government, Voluntary Nonprofit Enterprises) must reflect some basic WHAT AND WHAT that the firms and the laws establishing them were created to satisfy
economic incentives and unmet needs
69
selfless concern for the well-being of others (or who may alternatively be primarily interested in the prestige of the hospital as compared to its peers. )
altruists
70
see the nonprofit differently, as a mix of altruism and profit motives.
* Lakdawalla and Philipson (2006)
71
* Their model makes clearer the entry and exit responses of nonprofits to changes in market conditions and government regulation.
The Profit-Deviating Nonprofit hospital
* Lakdawalla and Philipson (2006)
72
U=U(q,Π)
73
(a version where the decision maker has no concerns for personal profit)
purely altruistic model
74
(where decisionmakers have no concern for the health of the community separate from profit) as special cases.
pure profit maximizing model
75
* A different account of the nonprofit hospital comes from theories that believe that hospitals maximize the pecuniary gain to the decisive set of decision makers.
The Hospital as Physicians’ cooperative
76
describe the nonprofit hospital as a “physicians’ cooperative,” assuming that the hospital is controlled by a physician staff who operate the hospital to maximize their net incomes.
* Mark Pauly and Michael Redisch (1973)
77
* This view of the hospital focuses on the “full price” of the hospital care, meaning the total charges to the patient by both the hospital (K, L) and the physician (M).
The Hospital as Physicians’ cooperative
