Question

Suppose that our total productivity function is given by TPHC = 0.5HC^2 - HC. What is the marginal product of healthcare for the 5th unit of HC? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer.

a 7.5

b 3.5

c 4

d Not enough information.

All healthcare exhibits diminishing marginal productivity of healthcare.

a

True

b

False

c

It depends on the type of healthcare.

Suppose that life expectancy increases from 80 to 100 years, when healthcare spending increases from $1 million to $1.1 million. What is the elasticity of health with respect to healthcare spending?

a

2.5

b

0.4

c

0.25

d

Need more information

Answer 1

Health Care system is the service which delivers the health care facilities to the entire population. The developed health care system is the main structure of the life expectancy of the population. Where as Life Expectancy refers to the statistical measure of the average time period. Because life expectancy shows the expectations of living a time period from the time of birth.

The total productivity function is given as

TPHC= 0.5HC² - HC ; where HC is the health care system.

Now taking the derivation of total productivity function with respect Health Care( HC) to calculate the Magical Productivity of Health Care.

MPHC= 0.5×2HC - 1

MPHC = HC -1.

Now consider the productivity of 5 unit of Health Care,

At 5 unit of health care. The marginal Productivity of Health Care can be calculated as

MPHC = 5-1 put the value of HC (=5)

MPHC= 4.

The marginal productivity of health care of 5th unit of Health Care is 4 unit.

The option C(4) is correct option.

Other options a,b,d are not correct. Because in the function of marginal productivity of health care( HC-1) if 5 unit of HC be put , the answer would be 4. Not the other options.

The statement - All health care exhibits diminishing marginal productivity of health care is Flase.

Because The marginal productivity of the health care shows the function MPHC = HC-1. This function shows the increasing marginal productivity of health care. That means more unit of production in health care ultimately gives the positive additional unit on the total productivity of health care.

The other option is not accepted. Because the marginal productivity of health care is diminishing in nature. As increase in health care always provides a positive incriment on the productivity of the health care.

The life expectancy and health care spending both are positively related. As the spending of health care increases , the life expectancy of the people also increases.

The elasticity of health refers to the percentage change in life expectancy due to one percent change in spending in health care. The elasticity of health can be explained as

E_{​​​​​H} = Percentage change in life expectancy / percentage change in spending on health care.

Initial life expectancy refers to 80 years

Increased life expectancy refers to 100 years .

Initial spending on health care system refers to $1million

Increased spending on health care system refers to $1.1 million.

Now consider the elasticity of demand in the following way

E_{​​​​​H} = initial spending on health care/ initial life expectancy × Change in life expectancy / Change in spending of health care.

E_{​​​​​H} = 1/80 × (80-100)/(1-1.1)

E_{​​​​​H} = 1/80× -20/-0.1

E_{​​​​​H} = 1/4 × 1/0.1

E_{​​​​​H} = 2.5

The elasticity of health with respect of health care spending is 2.5.

The correct option is a(=2.5)

The other options b, c and d are not correct. Because after calculating the elasticity of health care ,the answer is (=2.5) is equal to the option a not to the other options. So the other options are not correct.

So option a is the correct option.