# 27 you serve 3000 private pay patients and 1000

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27)You serve 3,000 private-pay patients and 1,000 healthmaintenance organization members. Your fixed costs are \$50,000 andyour incremental cost is \$50. You currently charge private-pay patients\$75. If you have set prices correctly, you must face a price elasticity ofdemand ofa.˗4.25.b.˗4.00.c.˗3.00.d.˗2.75.
28)You serve 3,000 private-pay patients and 1,000 healthmaintenance organization (HMO) members. Your fixed costs are\$50,000 and your incremental cost is \$50. You currently chargeprivate-pay patients \$75 and HMO members \$60.
29)Using marginal cost pricing, you have set a price of \$200. For thesame service, you accept a Medicare payment of \$175. You would notchange what you charge other patients just because Medicare changedits payment.
30)Your average and marginal cost is \$300. You charge \$500 andserve 1,000 customers. You forecast sales of 1,200 at a price of \$450.
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Chapter 7 / Exercise 11
Principles of Microeconomics
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31)Your average and marginal cost is \$300. You charge \$500 andserve 1,000 customers. You can sell 200 more to a health maintenanceorganization (HMO) if you agree to a price of \$450.a. Marginal revenue is \$450 from the HMO deal.b. Marginal revenue from the HMO deal is larger than marginal cost.c. Selling to the HMO will increase profits.d. All of the above
32)Your marginal cost is \$100 and your price elasticity of demand is˗3.00. You charge \$150, but increasing your price to \$175 shouldincrease profits.
33)Your firm spent \$200,000,000 bringing a new drug to market. Eachpill costs \$2 to manufacture. The price elasticity of demand is˗3.00.You should charge
34)You provide therapeutic massage services, focusing on stressreduction services that are not covered by insurance. Your monthlyoverhead is \$2,000. You value your time at \$20 per half hour (how longa therapeutic massage takes). Supplies per massage cost \$4. Youcurrently charge \$75 per massage and have a monthly volume of 100clients per month. Your trade journal says that a 5 percent reduction inprices typically results in a 7.5 percent increase in volume. What wouldhappen to your volume, revenues, and profits if you cut your price to\$70? If you raised your price to \$80?35)Your firm spent \$100 million developing a new drug. It has nowbeen approved for sale, and each pill costs \$1 to manufacture. Yourmarket research suggests that the price elasticity of demand in thegeneral public is -1.1.a.What price do you charge the public?b.What would happen to profits if you charged twice as much?
c.What role does the \$100 million in development costs play inyour pricing decision?

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Term
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Chapter 7 / Exercise 11
Principles of Microeconomics
Mankiw
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