1. The average total cost of operating a surgical room is $700 per case if the volume is 100 cases, and $690 per case if the volume is 110 cases. What is total cost at each of these two volumes? What is the marginal cost of another case within this range?
2. Extended care facilities are paid on a per diem basis, and they have an upward sloping supply curve. What will be the effect on supply or quantity supplied in each of the following cases:
a. a reduction in the real per diem rate paid to the extended care facility?
b. an increase in wages paid to the staff who work in the extended care facility?
c. a new cleaner that allows the extended care facility to hire fewer custodial staff?
d. a greater supply of home care services (a substitute for extended care facilities)?
3. The federal agency responsible for covering the cost of dental care for low-income seniors has set a rate of $100 for various dental treatments. In addition to these seniors, dentists have patients who pay for their dental services. The demand curve for each dentist is shown below.
|
Out-of-Pocket Price
|
Quantity of Dental
Treatments Demanded
|
|
$160
|
0
|
|
145
|
3
|
|
130
|
6
|
|
115
|
9
|
|
100
|
12
|
|
85
|
15
|
|
70
|
18
|
4. Each dentist also has a cost schedule, as shown below.
|
Quantity of Dental
Treatments Demanded
|
Total Cost
|
|
0
|
$ 250
|
|
3
|
350
|
|
6
|
550
|
|
9
|
850
|
|
12
|
1,250
|
|
15
|
1,750
|
|
18
|
2,350
|
a. If each dentist in this system works on a profit-maximizing basis, how many treatments will be provided to both the paying patients and to the federally funded seniors? (Show your work by tabulating appropriate columns for TR andTC, as well as for MR and MC.)
b. What would the number of paying patients and federally funded seniors be if the federal funding agency raised its rate to $120 per treatment? (Show all your work.)