Physician Visits Case Study


The state Medicaid agency has set a rate of $5.50 per visit for all Medicaid enrollees who visit a physician. Each physician also has private paying patients. The demand curve for each physician can be characterized as follows, and physicians can be regarded as individual monopolists. Each physician also has a cost schedule that can be characterized as follows:
Quantity of visits provided                                                          Total cost
0                                                                                   $5
1                                                                                   $7
2                                                                                   $11
3                                                                                   $17
4                                                                                   $25
5                                                                                   $35
6                                                                                   $47

a. If each physician is a profit maximizing provider, how many visits will he/she provide to public and private patients?
b. What will the number of visits provided be if the Medicaid Agency lowers its rate to $3 per visit, but the demand remains the same?

SKU: physician-visits-case-study Category: