Suppose that you are interested in comparing the costs of producing inpatient care services at XYZ Hospital with those at ABC Hospital. Further suppose that the two hospitals annually admit about 24,000 (XYZ) and 32,000 (ABC) patients at average short-run total costs per admission of roughly $11,000 (ABC) and $12,000 (XYZ). Using short run cost theory, identify four factors that might explain why ABC Hospital has higher average short run costs of production than XYZ Hospital.
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Suppose that you are interested in comparing the costs of producing inpatient care services at XYZ Hospital with those at ABC Hospital. Further suppose that the two hospitals annually admit about 24,000 (XYZ) and 32,000 (ABC) patients at
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- Suppose a hospital has to choose one of two X-ray machines to purchase. One costs $200,000 to purchase, and each image produced by the machine costs $10. The other sells for $250,000, but each image costs only $2. a) What is the fixed cost and marginal cost for the first machine? b)How many X-ray images must be made before the cost of the two machines becomes equal?A company that produces healthcare services (patient visits) operates with the following production function where q denotes the weekly output level in terms of the number of patients, L represents the hours of human intelligence (doctors and nurses) employed per week, and K denotes the hours of artificial intelligence utilized per week: 9 L0.5 K0.25 = The cost per hour for artificial intelligence is represented by r, and the cost per hour for human intelligence is denoted by w, both expressed in dollars per hour. 1) Determine the optimal levels of L and K that minimize the firm's costs given a target level of production q. Express the cost-minimizing levels of L and K as two functions of q, w, and r. Show your work carefully.In a fishery the long-run harvest function (harvest volume) isH(E) = aE - bE2, with a, b representing positive constants and E is fishing effort.Total cost is TC(E) = CE, with e being the unit cost of effort.Total revenue is TR(E) = pH(E), with p being the constant price of fish. Explain why higher levels of effort (E) beyond a certain point are associated withreductions in long-run total revenue (TR).
- Question 6. A division of chapman corporation manufacures a pager. The weekly fixed cost for the division is 20,000 dollars and the mariginal cost is MC(q) = 0.08q³+3.6q²+60q dollars per pager. The company realizes a weekly mariginal revenue of MR(q) = 0.28q³+76.2q, 0≤ q≤ 75 dollars per pager. Find the level of production that will yield a maximum profitIn a fishery the long-run harvest function (harvest volume) is H(E) = aE – bE?, with a, b representing positive constants and E is fishing effort. Total cost is TC(E)= cE,with c being the unit cost of effort. Total revenue is TR(E) = pH(E), with p being the constant price of fish. Explain why higher levels of effort (E) beyond a certain point are associated with reductions in long-run total revenue (TR). Explain why it generally is not efficiency- maximizing for society to supply the level of fishing effort that maximizes the sustainable yield.Consider the data in the table which applies to the provision of psychological testing services. Calculate the variable production cost per unit (one unit = one test) if the number of tests is 400 per month. Sales per unit $320 Fixed costs (per month) Selling and administration 16,000 Production overhead 16,000 Variable costs (per test) Labor for oversight and feedback 140 Outsourced test analysis 22 Materials used in testing 7 Production overhead 15 Selling and administration 12
- The Mini-Case “Economics of Scale at Google” describes economies of scale for Google Cloud Storage. The cost function for this service is well approximated by C=F +cq, where C is total cost, F is fixed cost, c is a constant, and q is output. What is marginal cost for this cost function? What is average cost? Over what range of output does Google have economies of scale?Suppose that the inverse demand for aloe juice in Greece is given by P = 100 – 2Q, where P is the price per bottle (1000ml) of aloe juice and Q is the total quantity, i.e., number of bottles, supplied in the market. There are two aloe juice manufacturers in Greece, Aloe Health and Aloe Wealth, operating under similar cost conditions. Each manufacturer's cost function is C(q) = 4qi, i =1,2, where q¡ is the manufacturer's individual quantity produced and Q = qı + q2. (a) Based on demand conditions every year, they decide, independently of each other, the quantity of aloe juice that will be supplied, letting the market determine the price per bottle. Find the equilibrium price and each firm's profit in this market. %3D (b) Consider that the above two manufacturers form a cartel, agreeing to fix their total quantity in such a way that the market maintains a collusive price. For simplicity, the eventual cartel directory will determine the target total-quantity and price pair, and each firm…The Mini-Case "Economies of Scale at Google" describes economies of scale for Google Cloud Storage. The cost function for this service is well approximated by C = F + cq, where C is total cost, F is fixed cost, c is a constant, and q is output. What is marginal cost for this cost function? What are the average fixed costs, average variable cost, and average cost? Over what range of output does google have economies of scale? If the general nature of this problem is bothering you let c = 10 and answer each question, then generalize to c being a constant. Marginal cost is a contant, MC = c.
- A municipal water utility employs quasi-fixed capital inputs-the water treatment plant and distribution lines to homes-to supply water to 20,000 households in the community it serves. The figure below shows the cost structure of this utility for various levels of water service. Quantity of water consumption is measured in 1,000-gallon units per month. AQFC is the average quasi-fixed cost curve, and LAC is long-run average cost. Long-run marginal cost, LMC, is constant and equal to $4 per 1,000-gallon unit. The inverse demand equation is P= 24 - 0.0004Qd Price and cost ($ per 1,000-gallon unit) 14 10 04 MR AQFC LAC LMC Quantity (1,000-gallon units per month) Second-best pricing does not achieve social economic efficiency because there is a deadweight loss ofProblem 06-05 For the pizza seller whose marginal, average variable, and average total cost curves are shown in the graph below, what is the profit- maximizing level of output and how much profit will this producer earn if the price of pizza is $0.25 per slice? Instructions: In the graph below, label all three curves by clicking on the dropdown to select the appropriate label. Then, indicate the profit-maximizing level of output on the graph. Cost Curves 3.50 3.25 3.00 2.75 2.50 2.25 2.00 1.75 81.50 1.25 1.00 0.75 0.50 0.25 0 Select Select Select 100 200 300 400 500 600 700 800 900Explain how the long-run average cost curves will differ between a private hospital and a soft-drink manufacturing company, and discuss how this would affect the optimum output level in each company.