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
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?