Reference no: EM131699279

Suppose Hospital A is the only hospital in the community and it's costs of producing services at two alternative levels of quality ("Average" and "High") are as described in the table below. Also suppose that the unit price of services (in $1000) is $250 regardless of the quality the hospital selects. Total revenue when price is $250, and the hospital's profits at the different volumes for two different qualities are also provided in the table

A) Suppose that price falls to $222. Calculate revenue and profits for two levels of quality at each level of output and fill in the blanks in the table for this case

B) Suppose Hospital A is currently a nonprofit. Specifically, it is operated to provide as high a volume of high quality services as possible as long as the hospital can "break even" (i.e. cover its costs). Assume demand is sufficient in the community for the hospital to sell as many services as it wants within the range described. Based on the information provided, what will be the quantity and quality of services provided by the hospital in this case?

C) Based on the information above and assuming profit maximization, how might quality and quantity provided change if Hospital A is a profit maximizing for-profit hospital?

D) Based on the information you have, when price falls to $222 what will be the level of output and quality selected by the hospital if: i) it operates as a nonprofit; and ii) a for-profit in this case? Does ownership form matter in this case?