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Review the information on the medical profession at http://www.ama-assn.org/.

Explain why the association is interested in limiting the number of doctors in the marketplace by requiring professional licensing requirements.

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Joshua Stredder
Joshua StredderLv10
28 Sep 2019

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Graduates veer away from pediatrics and family medicine. "Since 1997 the number of medical school graduates going into pediatrics or family medicine has dropped by 50%. New doctors are opting instead for specialties such as orthopediac surgery, which pays an average of $480,000 a year, instead of pediatrics which pays $171,000".

First, discuss the decision by doctors to enter seperate markets for various specialities rather than starting a family practice. Second, discuss the monoploy that the American Medical Association holds on the production of doctors in the US and its implications on market prices and efficiency.

Cosmetologists in many states face substantially heavier training requirements than Emergency Medical Technicians. In markets in which consumers cannot judge quality prior to consuming goods, the issue is whether licensing of the occupations producing the goods improves quality and economic welfare. Read the WSJ article 'Do Barbers Really Need a License?' by Dick Carpenter and Lisa Knepper, May 11, 2012 (pdf). Also, read 'Do barbers really need a license?' By Bob Craft.

https://bbaddins.schoolcraft.edu/addins/econ202v2/docs/mod12Barbers.pdf http://cbnclean.typepad.com/blog/2012/05/do-barbers-really-need-a-license.html

In your discussion post, respond to the following questions:

1. What is the "lemons problem"? In occupations with a lemons problem, does occupational licensing improve economic welfare?

2. What evidence do the authors provide in favor of eliminating occupational licensing requirements from some professions?

Presently, AFC has on its medical staff 10 doctors and 10 nurses. The daily wage of a doctor is $800, whereas a nurse is paid only $200 a day.

a. Write the equation for the medical isocost of AFC.

b. It has been estimated that an additional doctor could increase the daily output of the clinic by 30 patients, while an additional nurse would increase the number of patients served in a day by only 10. What is the marginal rate of substitution between doctors and nurses?

c. Is the mix of doctors and nurses the clinic is presently using optimal? Explain.

d. Suppose the clinic wishes to expand its operation. Would you recommend that the clinic increase the numbers of its nurses and doctors equally? Explain.

e. Now suppose as a result of an increase in the number of foreign doctors immigrating into the country the daily wage of doctors has dropped to $500. Should this change the hiring practices of the AFC? Explain.

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