A busy urgent care clinic has average costs of $40 and incremental costs of $60.

a. How could incremental costs be higher than average costs?

b. The clinic charges $80 for a visit. What price elasticity of demand does this information imply?

c. Volume is currently 200 visits per week. What are the clinic’s profits?

d. An HMO guarantees at least ten patients per week. It proposes a fee of $55. Should the clinic accept the contract?

e. What happens to profits if it accepts the contract?