1.7 A study by Jean Mitchell found that urologists in group practices that profit from tests for prostate cancer order more of them than doctors who send samples to independent laboratories. Doctors’

groups that perform their own lab work bill Medicare for analyzing 72% more prostate tissue samples per biopsy and detect fewer cases of cancer than doctors who use outside labs (Christopher Weaver, “Prostate-Test Fees Challenged,”

Wall Street Journal, April 9, 2012). Explain these results. Do these results necessarily demonstrate moral hazard or can the results be explained in another way? (Hint: See the Application “Selfless or Selfish Doctors?”.)