The focus of this assignment is on the production side of the Healthcare Market. Pricing and demand will be taken as exogenously determined. Your goal in each part of this assignment is to efficiently use inputs. This starts with what might be termed the short short-run, where all inputs are fixed but they can be reallocated to different purposes. It then moves to the short-run, where some inputs (e.g., labor) is variable, but other inputs (e.g., capital) are fixed. It concludes with long-run, where all inputs are variable.

Part 1

The clinic consists of 4 workers (A and B are doctors, and C and D are physician assistants) who share some or all of the following tasks: Performing Medical Procedures, Follow-ups, and Test. The data bellow gives their time per task, in minutes. Assume that each can work up to 6 hours per day (360 minutes) at these tasks, but no more. N/A means that the individual isnt qualified to perform the medical procedure

Individual	Medical Procedures	Follow- ups	Routine Test
A	21	10	5
B	15	9	6
C	N/A	20	8
D	N/A	18	6

Each patient seen will ultimately need 1 medical procedure, 2 follow ups, and 3 tests

Question 1.

Assuming this Initial Scenario:

For each medical procedure that A does, he also does 1 follow-up and 1 test.

C is As assistant; for each medical procedure that A does, C does 1 follow-up and 2 tests.

For each medical procedure that B does, she also does 1 follow-up and 1 test.

D is Bs assistant; for each medical procedure that B does, D does 1 follow-up and 2 tests.

Calculate the number of patient equivalents that can be handled during a workday?

In solving for this, you must use a whole number; no partial patients are allowed. Some staff may be partially idle. You are reporting the aggregate for the four workers. Your score on this question will be based on how close you are to the correct answer without going over.

Hint: If you have 4 Medical procedures, 8 Follow-ups, and 12 tests, that counts for 4 patients-equivalent so your answer would be 4.

Question 2

Reallocating Labor

If each worker is assigned to task so that total group output is maximized, how many patient-equivalents can be seen per day? Use whole numbers when assigning tasks. Your score on this question will be based on how close you are to the maximum possible number of patients. You want to use the concept of comparative advantage.

Question 3

Clinic has excess physical capacity, so it expending by hiring additional labor. Two type of workers can be hired: Doctors (like A and B) or Physician Assistants (like C and D). The expected hourly cost of a Doctor is $150, while the hourly cost for physician assistant is $50. Assume that the clinic wants to see a total of 50 patients-equivalents per day (this includes the production by current workers.) While the actual productivity of future hires is unknown, their assumed time per task (in minutes) is given in the following table.

	Medical Procedure	Follow-ups	Test
Doctors	20	10	6
Physician Assistant	N/A	20	8

In deciding who to hire, you may reallocate tasks of current employees. You goal is to reach 50 patient-equivalent goal at the lowest incremental cost. You may hire part-time workers, so you are not limited to a whole number of Doctors or Physician Assistants.

1. How many Doctors are hired?
2. How many Physician Assistant are hired?
3. What is the incremental daily cost (e.g., multiply the labor hours of your new hires by their hourly wages and sum)?
4. Calculate the Average Incremental Cost of adding a new patient-equivalent (e.g., divide your answer for# 5 by the increase in the number of patients relative to #2).
5. Assuming that A and B are paid $150/hour and that C and D are paid $50/hour, calculate an overall average labor cost per patient-equivalent (e.g., for all 50 patients).

Question 4

Assume that the above clinic is at capacity with the workers you hired above. To expand further, some adjacent office space would need to be leased and new equipment would need to be added. The fixed cost associated with this are shown below. The patient-equivalents are total patients seen, NOT THE INCREASE IN PATIENTS

Patient-equivalent	Increase in cost per day
50	$0
70	$2500
90	$4000
100	$6000

Other assumptions:

The Marginal Cost (labor, operating cost, and consumables, but not the fixed cost) of seen another patient-equivalent is $150.

The revenue from a patient-equivalent is fixed at $300.

Calculate the Average Incremental Fixed Cost per patient-equivalent for:

1. An increase from 50 to 70 patients.
2. An increase from 70 to 90 patients.
3. An increase from 90 to 100 patients.
4. In expending the clinic, which of the following are profitable; Stay at 50 patients, expand to 70, expand to 90, expand 100 patients.