Demand is given as Qd = 420 - 8W, where Qd is the quantity demanded (in full-time equivalents) and W is the hourly wage rate. Supply is given as Qs = -1,000 + 40W, where Qs is the quantity supplied.

Your hospital is the only hospital for hundreds of mile with a particular therapy. The inverse demand function for this therapy is given as: P = $12,500 - 5Qd, where Qd is the annual quantity demanded. While your fixed costs are high (due to the cost of specialized machines), your marginal costs for a full treatment are 'just' $600 per treatment.

11. If you set a single price to maximize profits, what quantity will you supply each year? (Guidance: The marginal revenue (MR) function has the same y-axis intercept as the inverse demand function, but twice the slope. Set MR equal to MC and solve for Q.)

12. What is the price for treatment? (Hint, plug your quantity from 11 into the inverse demand function.)

13. If the treatment is priced at the marginal cost to your company, how many treatments will be provided per year?

14. What is the deadweight loss due to monopoly power in this market? (This is covered in one of the lessons.)