Question Topic: Cost Structure

Green Valley Hospital and Cape Fear Hospital both provide dermatology services. Green Valley hospital pays dermatologists fixed salaries of $150,000 per year. Cape Fear Hospital pays dermatologists $30 per exam. Patients are charged $40 per exam. Both hospitals will have 3,000 exams per year. Please note: Green Valley's cost of staff is fixed cost, and Cape Fear hospital's cost of staff is a variable cost.

A) What is the net income for both hospitals?

B) What happens if Green Valley Hospitals lowers the price per exam to $29 has 5,000 patients while Cape Fear Hospital has 1,500 patients who pay $45 per exam. What is the net income for both hospitals?

C) What happens If both hospitals now charge patients $29 per exam and have 7000 patients. What is the net income for both hospitals?