Consider Figure 14.1. Suppose that a hospital has the ability to be a perfect price discriminator in the private market, that is, it can charge every private patient the maximum that the patient is willing to pay. Explain how this will affect the number of private patients the hospital will take and the impact on the hospital’s profi ts.

Transcribed Image Text:

P Surplus over variable Demand R R cost C C Marginal revenue Surplus over variable cost Q A. Private Sector Q B. Medicare Sector Figure 14.1 Analysis of Changes in the Medicare Hospital Reimbursement Rate Average variable cost