Healthcare Administration

In a perfectly competitive market, the following will occur in response to different changes in the market.

A decrease in the wage of clinic-based nurses will cause a reduction in the cost for nurses. This will result in a decline in the price of physician services, because the price decrease is going to be passed onto the consumer. The output of physician services will not change as the cost declines, because the decrease in the cost of the input will be offset with an offset in revenue, essentially leave physician profit -- which should be zero in perfectly competitive market -- unchanged.

Cost-enhancing medical technologies will cause the price of physician services to decline. In a perfectly competitive market buyers have perfect information, so they know that the cost of providing the service has declined. Thus, they will demand that the costs are passed along to them. Again,...
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