Reference no: EM133126202

1. You provide IV infusion services, focusing on services that are not covered by health insurance. Your monthly overhead is $2,300. You value your time at $50 per half hour (you can run 4 infusions per half hour). Supplies per infusion cost $6. You currently charge $140 per infusion and have a volume of 300 clients per month. Your research tells you that a 6 percent reduction in prices will result in a 9.5 percent increase in volume. What would happen to your volume, revenues, and profits if you cut your price to $131.60? What about if you raised your price to $152?
2. A new test identifies individuals with a genetic predisposition to breast cancer. People who are predisposed to breast cancer cost 150% of the cost to insure people without such predisposition. Can you make a good case that a law prohibiting this test would be good for society?
3. Compared with an infusion, a new pill reduces the cost of administering chemotherapy from $38 per dose to $31 per dose. The complication rate of each alternative is 2%. What sort of analysis should you do? Which alternative should you choose?
4. Two dermatologist practices want to merge. The price elasticity of demand for dermatology services is -0.35. Firm 1 has a volume of 7,500, fixed costs of $70,000, marginal costs of $20, and a market share of 8%. Firm 2 has a volume of 15,600, fixed costs of $65,000, marginal costs of $20, and a market share of 12 percent. The merged firm will have a volume of 21,500, fixed costs of $95,000, marginal costs of $20, and a market share of 20%.
5. What are the total costs, prices, revenues, and profits for each firm and for the merged firm, respectively?
6. How does the merger affect markups and profits?