4) What are the relevant costs associated with Dr. Ashwen's decision to accept or reject Bernard's proposal? For instance, is the cost of Dr. Ashwen's house relevant? What about the portion of the payment associated with her office space? The cost of her education, or the cost of learning NERT? Cost of anything else? (2 points) 5) What do you believe is a fair price for NERT? Do you think Bernard's offer is too high, low, just right, or totally inappropriate? Can you figure out how he determined his offer price? (2 points) Bernard Crandall's Proposal to Dr. Ashwen Although Bernard was quite happy with the treatments that he had received from Dr. Ashwen using NERT, he was concerned about the cost. So, before his next visit, he researched the market price for NERT. One of the alternative medicine practitioners Bernard had visited in the past was Dr. Greco, who practice was a twelve-hour drive away in another state (Bernard had recently moved). Dr. Greco had a national and international reputation as an alternative medicine provider because he traveled 20 weekends per year teaching seminars, at least one of which Dr. Ashwen herself attended. So, Dr. Greco was very reputable, and he treated patients using NERT, charging only $10 per treatment. While sitting in Dr. Ashwen's treatment room, he told her that he wishes to receive NERT but that he is only willing to pay $12.50 per treatment for a total of $100 for eight treatments. Place yourself in Dr. Ashwen's position. How should she respond to Bernard's request? What costs are relevant for Dr. Ashwen's decision about whether to accept or reject Bernard's proposal? Alternative medicaine providers were not so rare that Dr. Ashwen did not have competition. While Bernard was unaware of any other skilled providers for either treatment, Dr. Ashwen was aware that other skilled providers for both treatments were available, both with lower prices and a shorter drive from Bernard's home. TABLE 1 Summary of Dr. Ashwen's Costs One-Time Costs (Paid in Full) Purchased treatment table Purchased other miscellaneous equipment Fees and travel incurred for training in AET Fees and travel incurred for training in NERT Recurring (Monthly) Expenses House payment (monthly rent) Misc. house-related fees (utilities, etc.) (average) (monthly) Student loan payment (monthly) (30-year loan, 8% interest) All other living expenses (average) (monthly) Part-time secretary (monthly) $12,195 5,700 6,100 7,250 $1,450 210 844 2,220 550 TABLE 2 Summary of Dr. Ashwen's Revenues $75 per treatment Chiropractic revenue (average) [Time per treatment = 10 minutes) AET revenue [Time for two treatments = 15 minutes] NERT revenue [Time for eight treatments = 15 minutes) $50 per treatment $50 per treatment Percent of revenue from chiropractic treatments Percent of AETS Percent of revenue from NERTS 75% 15% 10%