MAE304 – Labour and Health Economics – Trimester 2 2023
Assessment Task 2 – Written Assignment – Individual
DUE DATE: Sunday, 17 September 2023, by 8:00pm (Melbourne time)
PERCENTAGE OF FINAL GRADE: 20%
Learning Outcomes
This task allows you to demonstrate your achievement towards the Unit Learning Outcomes (ULOs) which have been aligned to the Deakin Graduate Learning Outcomes (GLOs).
The learning outcomes that are aligned to this assessment task are:
Unit Learning Outcomes (ULOs) Graduate Learning Outcomes (GLOs)
ULO1 Apply the theoretical frameworks underlying labour and health economics. GLO1: Discipline-specific knowledge and capabilities
GLO5: Problem solving
ULO2 Explain the significance of institutional factors in labour market outcomes. GLO1: Discipline-specific knowledge and capabilities
GLO2: Communication
GLO4: Critical thinking
GLO5: Problem solving
ULO3 Explain the role and importance of empirical work in labour and health economics. GLO1: Discipline-specific knowledge and capabilities
GLO4: Critical thinking
GLO5: Problem solving
ULO4 Outline important policy issues relating to the labour market and population health. GLO1: Discipline-specific knowledge and capabilities
GLO2: Communication
GLO4: Critical thinking
GLO5: Problem solving
ULO5 Communicate ideas and important concepts effectively. GLO1: Discipline-specific knowledge and capabilities
GLO2: Communication
Description
The assignment consists of 8 questions. (The total marks=200 points=20% of your total unit marks)
Section 1. Evaluating statements (True/False/Unsure) (4 Questions, 80 points)
Please evaluate the following statements ( e.g. True/False/Unsure) and substantiate your answer.
Q1. The finding of a positive relationship between an individual’s hours of leisure and the market wage rate is inconsistent with the predictions of her utility maximising decision under the assumptions of a standar
d labour supply model.
(20 points)
Q2. The firm will use more of workers and less capital when r (interest rate) increases.
(20 points)
Q3. In theory, while an increase in the minimum wage with full compliance can increase the income of the low-skilled workers who retained work, it has an ambiguous effect on both the level of employment and the level of unemployment.
(20 points)
Q4. When average healthcare cost is positively correlated with hospital size, we can safely conclude that there is no evidence for the existence of economies of scale.
(20 points)
Section 2. Numerical Problems (2 Problems, 60 points):
Q5. Assume an individual has a utility function of this form
U(C, L) = 14 + 6(CxL)
This utility function implies that the individual’s marginal utility of leisure is 6C and her marginal utility of consumption is 6L. The individual has an endowment of V=$100 in non-labour income and T = 16 hours to either work (h) or use for leisure (L). Assume that the price of each unit of consumption good p=$1 and the wage rate for each hour of work w=$25.
(a)Find the reservation wage of this individual.
(10 points)
(b)What is this individual’s optimal amount of consumption and leisure
(10 points)
(c)Suppose the government introduces a new welfare program. For those people who don’t work, they will receive $100 of welfare payment. Compute the new optimal labour supply for the individual under the welfare program. Does the individual accept the welfare program and not work Show why or why not.
(10 points)
Q6. Suppose a company has invented and patented a new effective drug to treat dementia. For simplicity, assume there is no fixed cost and the marginal cost of producing the drug is: . Without being covered in any insurance plan, the market demand is as follows:
(a)What are the equilibrium price and quantity, assuming the drug is not covered by any health insurance plan
(10 points)