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 Exercises

 = exercise is available on MyEconLab; * = answer appears at the back of this book; M = mathematical problem.

per biopsy and detect fewer cases of cancer than doctors who use outside labs (Weaver, Christopher,

“Prostate-Test Fees Challenged,” Wall Street Journal, April 9, 2012). Explain these results. Do these results necessarily demonstrate moral hazard or is there another possible explanation?