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Incentivize physician groups to integrate

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Question

1. Under a proposed health care reform, doctors' fees will be capped at 80% of their current rate, and doctors can order blood tests that will be reimbursed at 70% of the current rate.

These reimbursement rates (do/do not) incentivize physician's groups to integrate vertically into testing services.

2. Suppose that home gardeners and farmers both use the same herbicide. Home gardeners are willing to pay $9 for a one-liter spray bottle ($9 per liter), whereas farmers are willing to pay $2,200 for a 200-liter barrel ($11 per liter).

In order to price-discriminate, the manufacturer should vertically integrate into (farmer retailers/home gardening retailers).

Reference no: EM132361663

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