ECON 1210 : Market for Medical Implant Services - Economics Assignment Help

Assignment Task :

Important Notes: 

• Assignment 3 must be submitted through the Quiz Tool in UM Learn (quiz will be posted at a later date). This question sheet is provided for information only. Do not submit the assignment in Word format, it will not be graded.

• Assignment is due December 9th, but I will accept late assignments without penalty until Saturday December 12th. No assignments will be accepted after December 12th. 

• Please note that I have scheduled a Final Exam Tutorial for Wednesday December 16th from 11:30am to 1:30pm.  This tutorial will be done through Zoom using our regular classroom link. We will work through the answers to Assignment 3 in this tutorial and I will answer any questions you may have about the course material. 

• Final exam is December 19th at 1:30 PM.

Questions

Part A. Inspection vs experience good

In Canada, individuals may choose to undergo elective surgery to have devices surgically implanted, to address health issues or other concerns. In many cases consumers pay for these services (i.e. they are not covered by Medicare).

In 2018, the CBC reported on a number of surgically implanted products that have been malfunctioning in patients’ bodies (ex. replacement hips, breast implants, birth control devices) and causing severe side effects (intense pain, links to cancer, mental illness, etc.). For more information see:

1. Assume the market for medical implant services is perfectly competitive (all required assumptions hold) and that these findings of malfunction were all new discoveries for both consumers and producers of these services. Using a supply and demand diagram, illustrate the old and new equilibrium price and quantity (before and after the information was released).

2. In reality, are surgical implants an inspection good or an experience good (according to James Galbraith)? Explain (define both).

3. Assume now that producers did know about the defects but misled consumers.  What assumption of the perfectly competitive market appears to be violated in this case? What type of problem does this cause?

4. How might government intervene to protect consumers of these products/services?

5. What impact would government intervention have on the profits of the suppliers of these services, assuming they are making an economic profit?

6. What unproductive steps might suppliers of these services take in response to maintain profits?

Part B Pollution:

1. In the textbook neoclassical model, is the optimal quantity of pollution generally greater than or equal to zero?

2. A 2018 report concluded that chronic exposure to air pollution from greenhouse-gas-emitting activities is killing an estimated 7,142 Canadians a year, and 2.1 million people worldwide. Draw a supply and demand graph for fossil fuel powered vehicles that reflects both the private and social costs and benefits of using these vehicles.  Clearly label each curve, as well as the private market and socially optimal prices and quantities.

3. Describe and show on the graph how the government might intervene in the market for fossil fuel powered vehicles to achieve the socially optimal outcome.

4. Why might a government choose to tax the pollution instead of taxing the good itself?  

5. What would be an alternative to taxing the pollution that could achieve an equivalent outcome? 

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