3. Suppose you operate a hospital. There are two kinds of inputs: regulated inputs (R) and...

 

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3. Suppose you operate a hospital. There are two kinds of inputs: regulated inputs (R) and unregulated inputs (U). Suppose that the hospital wants to reach an output of 360 patients seen 1/2 1/2 per day. Their production function is Q = U¹/²R¹/² and the price of regulated and unregulated inputs are both equal to one. a. What is the cost minimizing number of regulated inputs used? (15 points) b. Suppose Certificate of Need Laws restrict the number of regulated inputs that you can use to 144. How much more cost must the hospital incur under Certificate of Need to see those 360 patients? (10 points) 3. Suppose you operate a hospital. There are two kinds of inputs: regulated inputs (R) and unregulated inputs (U). Suppose that the hospital wants to reach an output of 360 patients seen 1/2 1/2 per day. Their production function is Q = U¹/²R¹/² and the price of regulated and unregulated inputs are both equal to one. a. What is the cost minimizing number of regulated inputs used? (15 points) b. Suppose Certificate of Need Laws restrict the number of regulated inputs that you can use to 144. How much more cost must the hospital incur under Certificate of Need to see those 360 patients? (10 points)

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