I. SHORT ANSWERS Read each question carefully and clearly state any assumptions made. Typically, one page typed response maximum. Compare and predict outcomes based upon transaction costs theory for a...

I
I. SHORT ANSWERS
Read each question carefully and clearly state any assumptions made. Typically, one page typed response maximum.
1. Compare and predict outcomes based upon transaction costs theory for a medical system where doctors are paid a salary based upon (a) the number of procedures performed and (b) doctor is paid a flat salary that is not affected by number of procedures performed. Outline the transaction cost approach in this setting and which system would be more “efficient” in providing medical services. Outline changes in the system that might in improved efficiency.
Ans: In a medical system, doctors play an integral role and need to be kept well paid and highly motivated. Transaction cost refers to the cost that the medical system goes through to in performing the above role. Each medical system would definitely aim at reducing the transaction costs and achieving high returns and a
and name for the services provide. As per the question, the doctors can be paid either on the basis of (a) the number of procedures performed or (b) a flat salary i
espective of the number of procedures performed.
To examine the efficiency of each system, it is beneficial to examine them in detail.
(a) Salary on the basis of number of procedures performed:
If the doctors are paid on the basis of the number of procedures performed then each doctor would aim at performing the highest number of procedures in a short span of time. This would hamper the efficiency of the doctors as monetary aspect will be considered for rather than customer satisfaction. This would also raise the transaction cost of the medical system as a number of procedures will be performed in a short span i
espective of efficiency and hence hampering the
and image of the medical system.
(b) Doctors are paid a flat salary i
espective of the number of procedures performed:
This approach would provide no incentive to the doctors to perform and hence would increase the cost of doctors to the medical system. This approach too would reduce efficiency as each doctor would shirk away his/her work and consider the salary received at the end of the month. Although this system would be more efficient as compared to the previous one, there would be no incentive to work for the doctors.
Suggestions for changes:
A few suggestions to improve efficiency of the medical system are:
a. Draft a report for each doctor which has details such as the number of patients attended to, working hours and number of procedures performed. This would help in assessing the work undertaken by each individual and improving his efficiency. Rewards and incentives can be given on the basis of performance at the end of every month.
. Draft a work norm criterion which clearly lays down the minimum and maximum number of procedures to be performed by each doctor and the added incentive for an extra procedure. This would help in reducing transaction costs, increasing efficiency and providing doctors an incentive to work over and above the flat salary structure.
2. Based on this article
http:
ageconsearch.umn.edu/handle/22253
a. What does factor analysis accomplish for the authors?
The concept of factor analysis in the article sates its meaning as a tool by with one can identify different factors responsible for the specific trend going on.
According to the factor analysis study done for the livestock products in China it is concluded that the factors that set customer preferences are external in nature. This implies that packaging,
and name and cooking convenience are more important than intrinsic value of the product like quality, price etc.
Thus, entry in the Chinese livestock industry will be determined by good packaging and labeling you do and your
and image rather than the quality of the product.
. Did they apply the method according to methods covered in the book and class?
Yes, the method of research is similar as in book. The research has been conducted by identifying the objectives, research methodology, deciding upon the research tools, conducting the survey, analysis, inferences and conclusion.
3. An economist suggests in a policy
iefing that the market needs a “level playing field” for small producers. He recommends that contracts for beef producers not be allowed more than 2 months prior to slaughter, and that the terms of all contracts be reported to provide pricing information to the market. He argues that...