A challenge for incentive-based payments is that

1) Systems with strong incentives to use resources wisely are risky for providers

2) Systems that reward many desirable activities are often too complex to much

3) System with strong incentives may reward opportunism

4) All of the above.

You serve 3,000 private pay patients and 1,000 HMO members. Your fixed costs are $50,000 and your incremental cost is $50. You currently charge private-pay patients $75 and HMO members 60$. If you could negotiate a higher price for HMO members

1) Profit would drop.

2) You should raise prices for private patients.

3) You should lower prices for private pay patients.

4)None of the above

Your marginal costs is $10 and you face an elasticity of -5.00. To maximize profits you should choose a price of

1)$12.50

2)$15.00

3)$20.00

4)None of the Above

You are considering acquiring a firm rumored to have developed an effective gene therapy for diabetes. Its value depends on this is effective, it is worth $200 per share; otherwise it is worth no more $40 per share