Consider a hypothetical three-stage screening test for a cancer with the followi

Question

Consider a hypothetical three-stage screening test for a cancer with the following rates of detection and costs:

Number of cases detected (cumulative)

Total costs (cumulative)

Calculate the average cost per cancer detected in the three stages.

Calculate the marginal cost per cancer detected in the three stages.

Suppose the marginal benefit per treated case in $12,000 per person. What would be the optimal screening given the costs?

Number of cases detected (cumulative)

Total costs (cumulative)

1 100 $200,000 2 105 260,000 3 106 300,000

Explanation / Answer

At the marginal benefit of 12000 , optimal screening will be 105 as at this number marginal cost=marginal benefit.

Sl No Number of cases detected (cumulative) Total costs (cumulative) Average Cost Marginal Cost 1 100 $200,000 $2,000 $2,000 2 105 260,000 $2,476 12000 3 106 300,000 $2,830 40000

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