2. If the price of a postoperative follow-up visit is reduced from $40 to $30, the number of patients returning for follow-up increases from 18 to 25.
a). What is the marginal revenue (MR)?
b). What is the price elasticity?
c). What would your estimate of MR and price elasticity be if the quantity demanded moved from 18 to 20 (instead of 25)?
3. (a)Successful rehabilitation of a shoulder injury obviates the need for reconstructive surgery costing $6000. However, rehabilitation is successful only 70% of the time. What is the expected value of rehabilitation?
(b). Treatment for endocarditis is risky. The patient will either die in the hospital, partially recover, or fully recover. With a full recovery, the patient can expect to live for another 20 years, but only 25% of patients fully recover. With partial recovery, the patient can expect to live 10 more years. However, 20% of patients die in the hospital. Assuming that patients usually live just one year without treatment. What is the expected value of the treatment expressed as additional years of life?
Getzen, E.T. (2013). Health economics and financing. Hoboken, NJ: John Wiley & Sons, Inc.