Problem 2 Look at the hospital cost data in the Cost Curves slides. To interpret this data: the values are indices, where 1.00 is the
Problem 2 Look at the hospital cost data in the "Cost Curves\" slides. To interpret this data: the values are indices, where 1.00 is the average cost for hospitals with 10,000 discharges. For example, the average cost of communications for hospitals with 5000 discharges is listed as 1.22. This means that the average cost of communications with hospitals with 5000 discharges is 122% of the average cost of communications for hospitals with 10,000 discharges (Le. 22% higher). The final row ("all cost centers\" gives the average total cost for the given number of discharges (relative to hospitals with 10,000 discharges). a) What (approximately) is the minimum efficient scale for hospitals, according to this data? Explain. b) In the range between 2,500 discharges and 10,000 discharges do hospitals exhibit economies or diseconomies of scale, according to this data? c) Given your answers to parts a and c, does this data support the idea that hospital care can be provided more efficiently when smaller hospitals merge operations to form larger ones
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