1. Draw a graph that includes the market demand, marginal cost, average total cost and marginal revenue curves for a hospital assuming it is a natural monopoly.Identify the profit-maximizing price and quantity and level of profits earned if the hospital operates as a for-profit hospital.Identify the price and quantity exchanged if the hospital operates as a not-for-profit.

b.What are the apparent differences in the outcomes of for-profit compared with not-for-profit hospitals?

2

a.Draw a graph with the demand and supply of physicians.Now use this graph to show the effects that occupational licensure improvements in the quality of training and restrictions on the number of physicians trained have on the market equilibrium price and number of physicians trained.

b.Given the looming shortage of physicians in the United States, what effect would a federal policy of increasing the supply of physicians have on the market for physician services?