ECON 317 SPRING 2020 – INDIVIDUAL ASSIGNMENT 5 TO BE SUBMITTED VIA COURSESPACES BY 11:59 PM ON FEBRUARY 25th, 2020

ECON 317 SPRING 2020 – INDIVIDUAL ASSIGNMENT 5 TO BE SUBMITTED VIA COURSESPACES BY 11:59 PM ON FEBRUARY 25th, 2020

Name (First, Family) Last 3 digits of Student ID#

TO SPEED UP MARKING, PLEASE ANSWER THE QUESTIONS IN THE FORMS AND SPACES PROVIDED. THE T.A. RESERVES THE RIGHT TO NOT MARK ANY QUESTIONS THAT ARE NOT ANSWERED IN THE EXPECTED LOCATIONS. By submitting this assignment you agree to the following honor code, and understand that any violation of the honor code may lead to penalties including but not limited to a non-negotiable mark of zero on the assignment: Honor Code: I guarantee that all the answers in this assignment are my own work. I have cited any outside sources that I used to create these answers in correct APA style.

Marking scheme – Make sure you answer all the questions before handing this in!

Question Marks

1 a 12

2 a 6

3 a 6

4

a 4

b 4

c 2

d 4

e 1

Total 39

1. [Reading] Read the following article: Gulati, S., During, D., Mainland, J. & Wong, A. M. F. (2019). Using the Time-Driven Activity- Based Costing Model in the Eye Clinic at The Hospital for Sick Children: A Case Study and Lessons Learned. Healthcare Quarterly, 20(4), 48.53. Retrieved from https://www-longwoods- com.ezproxy.library.uvic.ca/content/25423 Note that the ‘Figure 2’ the article refers to is not in the main body (or PDF) of the article itself: you must retrieve it from https://www-longwoods- com.ezproxy.library.uvic.ca/articles/images/HQ_Vol20_No4-Gulati-Fig2.pdf a. (12 marks) Write a 3-2-1 report in the usual fashion, using the form available on the ECON 317 Coursespaces page.https://www-longwoods-com.ezproxy.library.uvic.ca/content/25423https://www-longwoods-com.ezproxy.library.uvic.ca/content/25423https://www-longwoods-com.ezproxy.library.uvic.ca/articles/images/HQ_Vol20_No4-Gulati-Fig2.pdfhttps://www-longwoods-com.ezproxy.library.uvic.ca/articles/images/HQ_Vol20_No4-Gulati-Fig2.pdf

2. [Costing] This question is intended to give you a gentle introduction to costing. Your friend Sophia is a real estate agent in Victoria. She is 35 years old and lives alone in a 480 square foot studio apartment that she rents furnished. (As a real estate agent, of COURSE she’s brought up the square footage in conversation.) She recently (February of this year) gave you a gift of a delicious loaf of home-baked banana bread. When you asked for the recipe, she pointed you to ‘Anna’s Classic Banana Bread’ on the Food Network web site. Being an economics student, you decided to calculate what the total cost of the loaf of banana bread was. You don’t have access to Sophia’s financial information, but you do know she shops at Thrifty’s, so that’s where you obtained your price data. The recipe1 calls for (quoted from the recipe itself): 1 ½ – 1 ¾ cups (375 – 400 g) mashed ripe bananas (3-4 bananas) [Assume it’s exactly 400 g] 6 Tbsp (90 g) unsalted butter, melted ½ cup (100 g) granulated sugar, plus extra for sprinkling [assume that’s an extra 5 g] ½ cup (100 g) packed light brown sugar 1 large egg, at room temperature 1 tsp (5 mL) vanilla extract 1 ½ cups (225 g) all-purpose flour 1 tsp (5 g) baking soda ¼ tsp (0.75 g) salt 1 cup (250 mL) chocolate chips [This should weigh 170 g, according to Aqua-Calc2.] It also requires 75 minute of cooking time, about 15 minutes of pre-heating time and about 15 minutes of preparation time. Since preparation can be done while the oven warms up, those two activities together should take a total of 15 minutes. The recipe also calls for 20 minute of cooling time, but since this doesn’t require supervision you decide not to count those 20 minutes as part of the time spent ‘working’ on the recipe. According to Expatistan3, a cost-of-living comparison web site, the monthly rent for a furnished 480 square foot studio apartment in a “normal” area in Victoria is $1,269. The monthly utilities for that same studio apartment are about $87. There are 29 days, and therefore 696 hours, in the month of February (2020 is a leap year!).

1 Olson, A. (n.d.). Anna’s Classic Banana Bread [Web Page]. Retrieved from https://www.foodnetwork.ca/recipe/annas-classic-banana-bread/19344/ 2 https://www.aqua-calc.com/calculate/food-volume-to-weight/substance/candies-coma-and-blank-semisweet- blank-chocolate-coma-and-blank-made-blank-with-blank-butter-blank–op-cup-blank-chips-blank–op-6-blank-oz- blank-package-cp- 3 Cost of Living in Victoria, Canada [Web Page]. (2020). Retrieved from https://www.expatistan.com/cost-of- living/victoria-canadahttps://www.foodnetwork.ca/recipe/annas-classic-banana-bread/19344/https://www.aqua-calc.com/calculate/food-volume-to-weight/substance/candies-coma-and-blank-semisweet-blank-chocolate-coma-and-blank-made-blank-with-blank-butter-blank–op-cup-blank-chips-blank–op-6-blank-oz-blank-package-cp-https://www.aqua-calc.com/calculate/food-volume-to-weight/substance/candies-coma-and-blank-semisweet-blank-chocolate-coma-and-blank-made-blank-with-blank-butter-blank–op-cup-blank-chips-blank–op-6-blank-oz-blank-package-cp-https://www.aqua-calc.com/calculate/food-volume-to-weight/substance/candies-coma-and-blank-semisweet-blank-chocolate-coma-and-blank-made-blank-with-blank-butter-blank–op-cup-blank-chips-blank–op-6-blank-oz-blank-package-cp-https://www.expatistan.com/cost-of-living/victoria-canadahttps://www.expatistan.com/cost-of-living/victoria-canada

Sophia is a 35-year-old, female, full-time real estate agent. According to the latest Statistics Canada data4 available, the average hourly wage rate for women aged 25 to 54 working full time in real estate5 in British Columbia in 2019 was $29.23. Looking over the Thrifty’s web site6, you find the following prices for the ingredients listed. Bananas: $0.33 for 190 g (Why a unit of bananas is 190 g is anyone’s guess.) Fraser Valley Unsalted Butter: $4.19 for 250 g Rogers Fine Granulated Sugar: $3.79 for 1000 g (1 kg) Rogers Best Brown Sugar: $3.99 for 1000 g (1 kg) Island Gold Large White Eggs: $3.69 for 12 Club House Artificial Vanilla Extract: $6.49 for 500 mL Robin Hood All Purpose Flour: $3.99 for 1000 g (1 kg) Arm & Hammer Baking Soda: $1.99 for 500 g Windsor Iodized Table Salt: $2.49 for 1000 g (1 kg) Compliments Milk Chocolate Chips: $3.99 for 270 g a. (6 marks) Use the information above to calculate an estimate the cost of the loaf of banana bread you were given. Give your answer to the nearest cent. To keep things simple, i) ignore taxes, ii) assume rent + utilities is a good measure of the opportunity cost of using the studio apartment, iii) assume the median hourly wage rate given above is a good estimate of the opportunity cost of Sophia’s time. Cost of the loaf of banana bread: $_________________ Work:

4 Statistics Canada. (2020, February 9). Employee wages by industry, annual (Table 14-10-0064-01) [Online Data Set]. Retrieved from https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=1410006401 5 The wage category is actually ‘Finance, insurance, real estate, rental and leasing’. 6 https://www.thriftyfoods.com/ Prices retrieved February 9, 2020.https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=1410006401https://www.thriftyfoods.com/

3. [Costing Canadian Health Care] For this question, we’re going to re-do example A-1 in CADTH’s Guidance Document for the Costing of Health Care Resources in the Canadian Setting, but for British Columbia in 2020, instead of Saskatchewan in 2016. Since in BC, Botox injections must be given by a medical professional7, and because the original example missed the fact that there is more than 1 injection per treatment, there will be a few extra steps. To help the TA mark your assignment, please fill in your answers in the blanks provided. Please note that the first blank you have to fill in is for the TOTAL cost, which you will not be able to calculate until the end of the exercise. a. (6 marks) TOTAL DRUG AND INJECTION COST PER ONABOTULINUMTOXINA (BOTOX) TREATMENT FOR OVERACTIVE BLADDER ADMINISTERED BY A PHYSICIAN IN BRITISH COLUMBIA: $ ___________________

Now for the steps that will get you to that answer…. A. Obtain the unit drug costs from the B.C. Drug Formulary Search Page: $______________ You can do this by copy-pasting ‘ONABOTULINUMTOXINA’ into the Generic/Brand name field at https://pharmacareformularysearch.gov.bc.ca/faces/Search.xhtml (Typing in ‘Botox’ in the same field also works, since that’s the brand name.) B. Since BC’s formulary only approves the 100 U dispensable unit, this step in the original example isn’t needed. If you checked the cover page of the Botox monograph (below), you’d find that 50, 100 and 200 unit versions are available. C. Obtain information on the recommended administration from the product monograph: How many units of Botox? ________ How many injections in the treatment? ___________ What type of injection: intra-venous, or intra-muscular? _____________ You can find the monograph at https://www.allergan.ca/en-ca/products/prescription – you want the one for Botox® (OnabotulinumtoxinA), NOT the cosmetic version below it.

7 Oetter, H.M. (2015). Registrar’s message. College Connector, 3(2). Retrieved from https://www.cpsbc.ca/for- physicians/college-connector/2015-V03-02/01https://pharmacareformularysearch.gov.bc.ca/faces/Search.xhtmlhttps://pharmacareformularysearch.gov.bc.ca/faces/Search.xhtmlhttps://allergan-web-cdn-prod.azureedge.net/allergancanadaspecialty/allergancanadaspecialty/media/actavis-canada-specialty/en/products/pms/9060x-2018-10-16-en-botox.pdfhttps://www.allergan.ca/en-ca/products/prescriptionhttps://www.cpsbc.ca/for-physicians/college-connector/2015-V03-02/01https://www.cpsbc.ca/for-physicians/college-connector/2015-V03-02/01

Once you have the monograph, use the Table of Contents to find the start of the section on DOSAGE AND ADMINISTRATION. Once in the right section, scroll down until you find the sub- section on ‘Overactive Bladder’. You’ll know you’re on the right page when you see a cut-away illustration of a bladder. The units of Botox needed are clearly listed in that section. Those units are, however, spread out across a number of injections. The text should make it very clear how many injections there are, and of what type. D1. Calculate the (Botox) acquisition cost based on administration: $________ This one’s easy. You already have the cost per unit of Botox, and the number of units required. Multiply one by the other to get the total cost. D2. Calculate the cost of injections needed for administration: $______________ Since the injections are being administered by a physician, we’ll need to find out how much they charge for an injection. To do this, you need to look up the relevant fee in the MSC Payment Schedule. You can find the latest version (updated November 1, 2019) at https://www2.gov.bc.ca/gov/content/health/practitioner-professional- resources/msp/physicians/payment-schedules/msc-payment-schedule Once you’ve opened the Payment Schedule, look for ‘Injections’ under ‘Relevant Services’, and make a note of the cost per injection of the relevant type8 (intramuscular or intravenous). Fee per injection: $_________ To obtain the cost of injections needed for administration, multiply the fee per injection by the number of injections you found in part C. E. Botox acquisition cost after markup and dispensing fees: $_____________ BC prices do not include markup or dispensing fees. You can find B.C.’s pharmacy markup allowance by consulting Section 5.6 of BC’s Pharmacare Policy Manual. The latest version is dated 2012 but has been continually updated when needed. You can find it at: https://www2.gov.bc.ca/gov/content/health/practitioner-professional- resources/pharmacare/pharmacare-publications/pharmacare-policy-manual-2012

8 Some of you may have noticed that the Payment schedule has several entries specifically for Botulinum toxin injections. Unfortunately, none of these are for treatment of an overactive bladder. Those fees only apply when the injections are administered for different diagnoses.https://www2.gov.bc.ca/gov/content/health/practitioner-professional-resources/msp/physicians/payment-schedules/msc-payment-schedulehttps://www2.gov.bc.ca/gov/content/health/practitioner-professional-resources/msp/physicians/payment-schedules/msc-payment-schedulehttps://www2.gov.bc.ca/gov/content/health/practitioner-professional-resources/pharmacare/pharmacare-publications/pharmacare-policy-manual-2012https://www2.gov.bc.ca/gov/content/health/practitioner-professional-resources/pharmacare/pharmacare-publications/pharmacare-policy-manual-2012

To determine the maximum allowable markup, you will have to check whether Botox is considered a High-Cost Drug. Follow the relevant hyperlink(s) in the appropriate section of the Policy Manual (5.8 High-Cost Drugs Policy) to do so. Botox doesn’t fall under the Reference Drug Program (RDP) or Low Cost Alternative (LCA) programs. (I checked so you don’t have to! If you want to double check, you can do so at https://www2.gov.bc.ca/gov/content/health/practitioner-professional- resources/pharmacare/pharmacies/low-cost-alternative-lca-and-reference-drug-program-rdp- data-files Maximum allowable markup for Botox: ____ % Dispensing fees are found in section 8.2 of the same Pharmacare Policy Manual. Assume the maximum reimbursable dispensing fee is charged. Maximum dispensing fee reimbursed by Pharmacare: $_________ To obtain the Botox acquisition cost after markup and dispensing fees, take the Botox acquisition cost from part D1, multiply it by (1 + markup %)9, and add the dispensing fee. F. It’s finally time to calculate the total cost. Add together the cost of injections (D2) to the cost of the Botox itself after markup and dispensing fees (E), and write your final answer in the blank provided at the top of this question. All done!

9 So for example, if the cost from D1 is $100 and the markup is 10%, you’d multiply $100 by 1.1 = 1 + 10% = 1 + 0.1.https://www2.gov.bc.ca/gov/content/health/practitioner-professional-resources/pharmacare/pharmacies/low-cost-alternative-lca-and-reference-drug-program-rdp-data-fileshttps://www2.gov.bc.ca/gov/content/health/practitioner-professional-resources/pharmacare/pharmacies/low-cost-alternative-lca-and-reference-drug-program-rdp-data-fileshttps://www2.gov.bc.ca/gov/content/health/practitioner-professional-resources/pharmacare/pharmacies/low-cost-alternative-lca-and-reference-drug-program-rdp-data-files

4. [Efficiency] This question will walk you through a simple example of using DEA to calculate efficiency. Refer to Lecture 18 and the sample answer for details. The table below was created using CIHI data for 201710. In terms of our model, output, Q = Perceived Health (in %), K = Per Capita nominal public spending on in 2016 and L = Per Capita nominal public spending on physicians in 2016.

Province/Territory L/Q K/Q

Newfoundland and Labrador $ 14.10 $ 38.52

Prince Edward Island $ 14.63 $ 34.32

Nova Scotia $ 14.44 $ 33.40

New Brunswick $ 14.57 $ 33.41

Quebec $ 14.98 $ 22.06

Ontario $ 15.86 $ 23.12

Manitoba $ 16.37 $ 31.28

Saskatchewan $ 16.41 $ 29.23

Alberta $ 17.44 $ 30.30

British Columbia $ 14.80 $ 25.61

Yukon Territory $ 18.89 $ 41.95

North West Territories $ 7.87 $ 94.21

Nunavut $ 17.14 $ 119.11

a. (4 marks) Using the table above, determine which provinces and territories are on the ‘isoquant’ as measured by a DEA envelope. (Hint: check for dominance and extended dominance. Un-dominated provinces/territories are on the frontier. As shown in the sample answer, you can check for dominance by making sure that K/Q goes down when L/Q goes up, and for extended dominance by making sure that the slope of the line connecting points on the frontier never goes down – becomes more negative – as L/Q goes up.) Provinces/Territories on the Envelope/’isoquant’:

10 Data from L and K were taken from Series E2 and E4 from the data tables for CIHI’s National Health Expenditure Trends, 1975 to 2019. Retrieved from https://www.cihi.ca/en/national-health-expenditure-trends-1975-to-2019, while data for Q was taken from CIHI, Your Health System in Depth, Perceived Health (Percentage) 2015 to 2016, retrieved from https://yourhealthsystem.cihi.ca/hsp/indepth?lang=en#/indicator/031/2/C9001/https://www.cihi.ca/en/national-health-expenditure-trends-1975-to-2019https://yourhealthsystem.cihi.ca/hsp/indepth?lang=en#/indicator/031/2/C9001/

Work (if you don’t show your work, you can’t get part marks for partially correct answers!):

b. (4 marks) Create a scatter plot (x-y graph) that includes ONLY the provinces/territories on the DEA ‘isoquant’ as specified in your answer to part a., plus Nunavut (if it isn’t already included). You should have K/Q on the vertical axis, and L/Q on the vertical axis. Draw the DEA envelope (our ‘isoquant’) on the diagram. Don’t forget the vertical and horizontal parts of the isoquant.

Diagram:

We’ll spend the rest of the question calculating the output efficiency of Nunavut.

c. (2 marks) What is the equation of the line from the origin (L/Q , K/Q) = (0,0) to the point on your graph representing Nunavut, (17.14 , 119.11)? How long is the line segment from the origin to the point representing Nunavut? (Hint: use the Pythagorean theorem.) Show your work. Note: this line segment corresponds to line segment OP on Slide 19 of the lecture notes for Lecture 18. Equation of the Line: _____________________________ Length of the line segment: ________________________ Work:https://www.mathsisfun.com/pythagoras.html

d. (4 marks) What is the equation of the DEA envelope where it is crossed by the line in part c.? What is the length of the line segment from the origin to this crossing point? Show your work. Hint: You can find the equation of a line given two points on that line. Note: the crossing point corresponds to point B on slide 19 of the lecture notes for Lecture 18. The line segment corresponds to OB on the same slide. Equation of the DEA envelope: _____________________________ Length of the line segment: ________________________________ Work:http://www.coolmath.com/algebra/08-lines/12-finding-equation-two-points-01

e. (1 marks) Use your results from parts c. and d. to calculate the Output Efficiency of Nunavut. (This corresponds to OB / OP on Slide 19 of Lecture 18.). Show your work.

Output Efficiency of Nunavut: ___________________ Work: