Homework Help is Here – Start Your Trial Now!
Business
Economics
a nos price of a bed day and x is the number of patient days of care demanded. The fixed cost of adding a new bed is $150 and the total housekeeping cost is given by C = (B/3.5), 2 where B is the total number of beds. a. Suppose the hospital's market price is fixed at $250/bed day. What is the net marginal revenue to this hospital from an increase of one additional bed? b. With p fixed at 250, graph the net marginal revenue curve, with the number of beds on the x-axis and dollars on the y-axis. Explain its shape. c. Suppose the hospital is restricted from increasing its capacity for now, but it can set the price for each bed day. What is the optimal price level for the hospital if the hospital's objective is to maximize profits? Will the hospital fully use its current capacity in this case? d. Now suppose the hospital is considering building branch in another town. There is no existing hospital in that town. The cost of each new

a nos price of a bed day and x is the number of patient days of care demanded. The fixed cost of adding a new bed is $150 and the total housekeeping cost is given by C = (B/3.5), 2 where B is the total number of beds. a. Suppose the hospital's market price is fixed at $250/bed day. What is the net marginal revenue to this hospital from an increase of one additional bed? b. With p fixed at 250, graph the net marginal revenue curve, with the number of beds on the x-axis and dollars on the y-axis. Explain its shape. c. Suppose the hospital is restricted from increasing its capacity for now, but it can set the price for each bed day. What is the optimal price level for the hospital if the hospital's objective is to maximize profits? Will the hospital fully use its current capacity in this case? d. Now suppose the hospital is considering building branch in another town. There is no existing hospital in that town. The cost of each new

Microeconomics: Private and Public Choice (MindTap Course List)
Microeconomics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506893
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter7: Consumer Choice And Elasticity
Section: Chapter Questions
Problem 8CQ
See similar textbooks
icon
Related questions
Question

Please answer and show complete solution. Thank you!

2. Suppose a hospital has 500 beds. It faces a demand curve x = 1,200 -2p, where p is the price of a bed day and x is the number of patient days of care demanded. The fixed cost of adding a new bed is $150 and the total housekeeping cost is given by C = (B/3.5), 2 where B is the total number of beds. a. Suppose the hospital's market price is fixed at $250/bed day. What is the net marginal revenue to this hospital from an increase of one additional bed? b. With p fixed at 250, graph the net marginal revenue curve, with the number of beds on the x-axis and dollars on the y-axis. Explain its shape. c. Suppose the hospital is restricted from increasing its capacity for now, but it can set the price for each bed day. What is the optimal price level for the hospital if the hospital's objective is to maximize profits? Will the hospital fully use its current capacity in this case? d. Now suppose the hospital is considering building a branch in another town. There is no existing hospital in that town. The cost of each new bed and housekeeping are the same as above, but the hospital's demand curve in this other town is x = 800-1.2 p. What is its profit-maximizing price per bed day? How many beds should the new hospital have?
Transcribed Image Text:2. Suppose a hospital has 500 beds. It faces a demand curve x = 1,200 -2p, where p is the price of a bed day and x is the number of patient days of care demanded. The fixed cost of adding a new bed is $150 and the total housekeeping cost is given by C = (B/3.5), 2 where B is the total number of beds. a. Suppose the hospital's market price is fixed at $250/bed day. What is the net marginal revenue to this hospital from an increase of one additional bed? b. With p fixed at 250, graph the net marginal revenue curve, with the number of beds on the x-axis and dollars on the y-axis. Explain its shape. c. Suppose the hospital is restricted from increasing its capacity for now, but it can set the price for each bed day. What is the optimal price level for the hospital if the hospital's objective is to maximize profits? Will the hospital fully use its current capacity in this case? d. Now suppose the hospital is considering building a branch in another town. There is no existing hospital in that town. The cost of each new bed and housekeeping are the same as above, but the hospital's demand curve in this other town is x = 800-1.2 p. What is its profit-maximizing price per bed day? How many beds should the new hospital have?
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 5 steps with 2 images

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Willingness to Pay
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Microeconomics: Private and Public Choice (MindTa…
Microeconomics: Private and Public Choice (MindTa…
Economics
ISBN:
9781305506893
Author:
James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:
Cengage Learning
Economics: Private and Public Choice (MindTap Cou…
Economics: Private and Public Choice (MindTap Cou…
Economics
ISBN:
9781305506725
Author:
James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:
Cengage Learning
Economics (MindTap Course List)
Economics (MindTap Course List)
Economics
ISBN:
9781337617383
Author:
Roger A. Arnold
Publisher:
Cengage Learning
Macroeconomics
Macroeconomics
Economics
ISBN:
9781337617390
Author:
Roger A. Arnold
Publisher:
Cengage Learning
Microeconomics
Microeconomics
Economics
ISBN:
9781337617406
Author:
Roger A. Arnold
Publisher:
Cengage Learning
SEE MORE TEXTBOOKS