Look at the hospital cost data in the "Cost Curve" slides (slide 13). To interpret this data: the values are indices, where 1.00 is the average cost for hospitals with 10,000 discharges. For example, the average cost of communications for hospitals with 5000 discharges is listed as 1.22. This means that the average cost of communications with hospitals with 5000 discharges is 122% of the average cost of communications for hospitals with 10,000 discharges (i.e. 22% higher). The final row ("all cost centers") gives the average total cost for the given number of discharges (relative to hospitals with 10,000 discharges). a) What (approximately) is the minimum efficient scale for hospitals, according to this data? Explain. (You can consider very small differences to be effectively zero when answering this question, and there are at least two answers that could be considered correct). b) In the range between 2,500 discharges and 10,000 discharges do hospitals exhibit economies or diseconomies of scale, according to this data?
Look at the hospital cost data in the "Cost Curve" slides (slide 13). To interpret this data: the values are indices, where 1.00 is the average cost for hospitals with 10,000 discharges. For example, the average cost of communications for hospitals with 5000 discharges is listed as 1.22. This means that the average cost of communications with hospitals with 5000 discharges is 122% of the average cost of communications for hospitals with 10,000 discharges (i.e. 22% higher). The final row ("all cost centers") gives the average total cost for the given number of discharges (relative to hospitals with 10,000 discharges). a) What (approximately) is the minimum efficient scale for hospitals, according to this data? Explain. (You can consider very small differences to be effectively zero when answering this question, and there are at least two answers that could be considered correct). b) In the range between 2,500 discharges and 10,000 discharges do hospitals exhibit economies or diseconomies of scale, according to this data?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
Transcribed Image Text:Look at the hospital cost data in the "Cost Curve" slides (slide 13). To interpret this data: the
values are indices, where 1.00 is the average cost for hospitals with 10,000 discharges. For
example, the average cost of communications for hospitals with 5000 discharges is listed as
1.22. This means that the average cost of communications with hospitals with 5000 discharges
is 122% of the average cost of communications for hospitals with 10,000 discharges (i.e. 22%
higher). The final row ("all cost centers") gives the average total cost for the given number of
discharges (relative to hospitals with 10,000 discharges).
a) What (approximately) is the minimum efficient scale for hospitals, according to this
data? Explain. (You can consider very small differences to be effectively zero when
answering this question, and there are at least two answers that could be considered
correct).
b) In the range between 2,500 discharges and 10,000 discharges do hospitals exhibit
economies or diseconomies of scale, according to this data?
Transcribed Image Text:Table 3
Average cost per discharge
2500
Cost center
5000
7500
10,000
15,000
20,000
discharges discharges discharges discharges dischares discharges
(100 beds) (136 beds) (200 beds) (270 beds) (310 beds) (440 beds)
Hospital administration 1.64
1.24
1.08
1.0
0.93
0.90
Public relations
1.12
0.98
0.97
1.0
1.03
1.07
General accounting
Communications
1.68
1.24
1.08
1.0
0.91
0.90
1.64
1.22
1.07
1.0
0.94
0.94
Purchasing
Patient accounts
Data processing
Credit and collectÍon
Medical records
+32
1.0
104
1.24
1.08
1.01
1.0
1.0
1.02
1.0
0.92
0.93
1.0
1.10
1.21
+24
106-
T.04
1.32
1.10
1.03
1.0
0.97
0.96
Printing and duplication 1.04
Personnel
1.02
1.01
1.0
0.98
0.97
1.32
1.06
1.0
1.0
1.02
1.06
Cafeteria
1.48
1.20
1.07
1.0
0.93
0.90
1.32
1.03
Laundry
Housekeeping
1.12
1.0
0.97
0.96
1.40
1.14
1.04
1.0
0.96
0.89
All cost centers
1.36
1.10
1.03
1.0
0.99
0.99
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 1 images
Recommended textbooks for you
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education