Consider a firm with a fixed-size production facility as described by its existi

Question

Consider a firm with a fixed-size production facility as described by its existing cost curves. a. Explain what would happen to those cost curves if a mandatory health insurance program is imposed on all firms. b. What would happen to the cost curves if the plan required the firm to provide a health insurance program for each employee worth 10 percent of the employees salary? c. How would that plan compare to one that requires each firm to provide a $100,000 group program that would cover all employees in the firm, no matter what the number of employees

Explanation / Answer

a. it will shift total cost and marginal cost upward, since the cost will go up if it hire more workers.
b. the curve will shift 90% upward,since 10% of the fees will be paid by workers,and not be the cost of the firm.
e. it is a matter of the size. If the fees x workers > $100K,the lump sum health program will benefit the firm.

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