12.9 The table shows case-mix-adjusted price and volume data for Dunes Hospital.
ID: 1193892 • Letter: 1
Question
12.9 The table shows case-mix-adjusted price and volume data for Dunes Hospital. Calculate its marginal cost, marginal revenue, and profits at each level of output. What price should it choose?
Admissions
6,552
9,048
9,672
9,948
10,296
Revenue
$52,416,000
$70,574,400
$73,507,200
$73,881,600
$74,131,200
Cost
$42,588,000
$59,264,400
$63,835,200
$66,393,600
$68,983,200
Price
$8,000
$7,800
$7,600
$7,400
$7,200
Admissions
6,552
9,048
9,672
9,948
10,296
Revenue
$52,416,000
$70,574,400
$73,507,200
$73,881,600
$74,131,200
Cost
$42,588,000
$59,264,400
$63,835,200
$66,393,600
$68,983,200
Price
$8,000
$7,800
$7,600
$7,400
$7,200
Explanation / Answer
Working notes:
1. Number of admissions = Q
2. MR = Change in TR / Change in Q
3. MC = Change in TC / Change in Q
Accordingly we get the following calculation table.
Profit is maximized (= $113,10,000) when Q = 9,048 admissions.
When Q = 9,048, Price = $7,800.
Admissions (Q) Revenue (TR) MR Cost MC Profit = TR - TC 6,552 524,16,000 425,88,000 98,28,000 9,048 705,74,400 7,275 592,64,400 6,681 113,10,000 9,672 735,07,200 4,700 638,35,200 7,325 96,72,000 9,948 738,81,600 1,357 663,93,600 9,270 74,88,000 10,296 741,31,200 717 689,83,200 7,441 51,48,000Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.