Macroeconomics 1st Edition by Dean Karlan,Jonathan Morduch

Exercise 14

Consider separately each of the following hypothetical scenarios about South Africa and answer the included questions. Assume in each case that medical school has an 80 percent success rate-in other words, 80 percent of people who attend medical school graduate and become doctors.
a. No doctors are allowed to emigrate, and the number of people going to medical school is given by D = 100,000 x I, where I is an index relating the income of doctors to those in other professions. If I = 4, how many students will go to medical school? How many more doctors will there be in South Africa?
b. The United States decides to offer visas for any doctors from South Africa. Additionally, I in the above equation changes to 10. Assume that 30 percent of doctors educated in South Africa immigrate to the United States. How many students will go to medical school? How many will become doctors? How many of those doctors will practice in South Africa, and how many will practice in the United States?
c. The United States decides to limit the number of doctors from South Africa who can obtain visas to no more than 10 percent of those graduating from medical school. Assume that I remains at 10. How many students will go to medical school? How many will become doctors? How many of those doctors will practice in South Africa, and how many will practice in the United States?