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    Chapter 6-Healthcare Production, Costs, and Supply

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    Lalita A/P Anbarasen
    This document summarizes key concepts from a lecture on health economics, including healthcare production, costs, and supply. It discusses short run costs for medical firms, considering both explicit costs like wages and supplies as well as implicit opportunity costs. It also covers long run costs, explaining how larger medical firms can achieve economies of scale through specialization of labor and capital, producing more output at lower average costs.

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    Chapter 6-Healthcare Production, Costs, and Supply

    Uploaded by

    Lalita A/P Anbarasen
    37 views7 pages
    This document summarizes key concepts from a lecture on health economics, including healthcare production, costs, and supply. It discusses short run costs for medical firms, considering both explicit costs like wages and supplies as well as implicit opportunity costs. It also covers long run costs, explaining how larger medical firms can achieve economies of scale through specialization of labor and capital, producing more output at lower average costs.

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    This document summarizes key concepts from a lecture on health economics, including healthcare production, costs, and supply. It discusses short run costs for medical firms, considering both explicit costs like wages and supplies as well as implicit opportunity costs. It also covers long run costs, explaining how larger medical firms can achieve economies of scale through specialization of labor and capital, producing more output at lower average costs.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    37 views7 pages

    Chapter 6-Healthcare Production, Costs, and Supply

    Uploaded by

    Lalita A/P Anbarasen
    This document summarizes key concepts from a lecture on health economics, including healthcare production, costs, and supply. It discusses short run costs for medical firms, considering both explicit costs like wages and supplies as well as implicit opportunity costs. It also covers long run costs, explaining how larger medical firms can achieve economies of scale through specialization of labor and capital, producing more output at lower average costs.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 7

    DIPLOMA OF HEALTHCARE

    MANAGEMENT

    DHM 2133
    HEALTH ECONOMICS

    Intellectual Property Rights


    Unless otherwise indicated, this Material is our propriety property and all source code, databases,
    functionality, software , website designs, audio, video, text, photographs, and graphics on the material
    are owned or controlled by Kolej UNiKOP. And are protected by copyright and various other
    DHM 2133
    Lecture by: LALITA
    ANBARASEN

    CHAPTER 6: Healthcare
    Production, Costs, and
    Supply
    Introduction

    A production function identifies how various inputs can be combined


    and transformed into a final output.

    Each combination is assumed to be technically efficient because it


    results in the maximum amount of output.
    SHORT RUN COSTS FOR A MEDICAL FIRM

    Economists and accountants refer to costs differently. Accountants considers


    only the explicit costs of doing business when determining the accounting
    profits of a medical firm.

    Explicit costs are easily identified because a recent market transaction is


    available to provide an accurate measure of costs.

    Wage payments to staff, utility bills, and medical supply expenses are all
    examples of explicit costs of healthcare firms.

    Economists consider both the explicit and implicit costs of production. Implicit
    costs reflect the opportunity costs of using any resources the medical firm
    owns.

    When determining the economic profit of a firm, economists consider the total
    costs of doing business, including both the explicit and implicit costs.
    LONG RUN COSTS

    Long run economies of scale refer to the concept that average costs fall as a
    medical firm gets physically larger due to specialization of labor and capital.

    Larger medical firms are able to utilize larger and more specialties in the
    various labor tasks involved in the production process.

    For example, people generally get very proficient at a specific task when they
    perform it repeatedly. Therefore, specialization allows larger firms to produce
    increased amounts of output at lower costs.

    Another way to conceptualize long run economies of scale is through a direct


    relation between inputs and output.
    For example, a doubling of all inputs that result in three times as much
    output is a sign of increasing returns to scale. Similarly, if a doubling of
    output can be achieved without doubling of all inputs, the production
    process exhibits long run increasing returns, or economies of scale.
    Thank you

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