5. A new vaccine offers protection against otitis media. Administering the vacci
ID: 1211697 • Letter: 5
Question
5. A new vaccine offers protection against otitis media. Administering the vaccine to 10,000,000 children under age 5 would reduce otitis media cases from 14,000,000 to 11,000,000. The vaccine costs $100 per patient. The cost per case avoided is
a. $91. b. $333. c. $401. d. $615.
13. A proposal has been advanced to limit advertising of pharmaceutical prices to prevent unfair pricing. This will change the price elasticity of demand from 6.00 to 5.00. The marginal cost of a typical prescription is $40. The typical customer fills 22 prescriptions per year. What effects will the limits have on customer costs?
a. They will increase costs by $1,044.
b. They will increase costs by $227.
c. They will increase costs by $44.
d. They will increase costs by $4.
11. The private demand for coal equals 8,400 40*Price. The supply of coal equals 160*Price. Because of the external costs associated with coal burning, the social demand for coal equals 8,400 40*(Price + 10). The social optimum (which recognizes the external costs of coal burning) could be realized by
a. imposing a $5 tax on producers and a $5 tax on consumers.
b. imposing a $10 tax per unit on producers.
c. imposing a $10 tax per unit on consumers.
d. all of the above.
10. The social demand for flu vaccine equals 10,000 20*(Price $10) because of the external benefits of the vaccine. The supply of vaccine still equals 180*Price. What is the social equilibrium price and quantity?
a. $75 and 13,500
b. $60 and 10,800
c. $51 and 9,200
d. $50 and 9,000
30. Some tax refund anticipation checks entail interest rates of more than 300 percent.
a. True
b. False
9. Buckley Clinic has fixed costs of $80,000, a volume of 8,200, marginal costs of $50, and a market share of 2 percent. The price elasticity of demand for clinic services is 0.22.
a. Buckley should charge $56.25. It will have profits of $85,750.
b. Buckley should charge $56.25. It will have a loss of $16,250.
c. Buckley should charge $55.00. It will have a loss of $39,000.
d. Buckley should charge $55.00. It will have a loss of $39,000.
8. A specialty hospital is for sale. It has a market share of 5 percent and a cost per case of $1,000. Overhead represents 20 percent of its costs. Two bidders have emerged. NSH is a specialty hospital company that does not have any facilities in the area. NSH has a cost per case of $1,200. LSS operates another specialty hospital in the area. LSS has a 10 percent market share and a cost per case of $850 (overhead is 25 percent of costs). You anticipate that LSS will be the winning bidder
a. because it will have higher markups after the merger.
b. because it should be able to reduce overhead as a result of the merger.
c. because it should be able to maintain or lower costs compared to NSH.
d. All of the above
7. Two occupational therapy firms want to merge. The price elasticity of demand for physical therapy is 0.40. The merged firm has a volume of 36,000, fixed costs of $240,000, marginal costs of $30, and a market share of 25 percent.
a. The merged firm should charge $80 and have profits of $1,560,000.
b. The merged firm should charge $80 and have profits of $1,260,000.
c. The merged firm should charge $60 and have profits of $660,000.
d. The merged firm should charge $40 and have profits of $60,000.
Explanation / Answer
5. c. $401
13. c. They will increase costs by $44.
11. a. imposing a $5 tax on producers and a $5 tax on consumers.
10. b. $60 and 10,800
9. d. Buckley should charge $55.00. It will have a loss of $39,000.
8. b. because it should be able to reduce overhead as a result of the merger.
7. a. The merged firm should charge $80 and have profits of $1,560,000.
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