Reference no: EM133064341

1. A single-specialty physician practice operates as a monopoly provider of professional services in a given city. The practice is assumed to maximize its profits by providing services to two different groups of patients: (1) privately insured patients and (2) Medicare/Medicaid (publicly insured) patients. The practice is assumed to negotiate prices directly with private insurers on behalf of its privately insured patients and to function as a price taker for its Medicare and Medicaid patients. Briefly describe how the practice would generally go about maximizing its profit across both groups of patients.

Continuing on with the single-specialty physician practice from question #1, assume that Medicare/Medicaid reduces its reimbursement to the practice from the initial scenario, while there is no change in the price / reimbursement for privately insured patients. How would profit maximization be affected by this change, and how would the practice be predicted to respond, assuming initial monopolist (profit-maximizing) conditions?