A new manager of a children\'s services program is assigned the task of administ

Question

A new manager of a children's services program is assigned the task of administering two ongoing programs; one that provides immunizations and one that provides diabetes screening. The total amount she can spend is $60,000. The following table shows the expenditures and benefits of the two programs. (HINT: What are the cost/opportunity cost of the programs).

Question: A nurse urges the new manager to increase the level of spending in the immunization program $50,000 because of a prevailing unmet need. How should the new manager respond to the nurse's request?

Immunization Program Screening Program Expenditures Benefits Expenditures Benefits 10,000 60,000 10,000 20,000 20,000 90,000 20,000 40,000 30,000 115,000 30,000 60,000 40,000 135,000 40,000 80,000 50,000 150,000 50,000 100,000

Explanation / Answer

To answer this, we formulate the table below showing the combination of immunization and screening programs (Totalling $60,000) & associated total expenses and total benefits from them.

So, it is seen that for the same total expenditure of $60,000, the highest total benefit is generated by the combination of Immunization Expense = $20,000 and Screening Expense = $40,000. Total benefit here is $195,000.

If as per the Nurse's request, Immunization expense is increased to $50,000, that leaves $10,000 for Screening & total benefit reduces to $170,000, resulting in a lost opportunity cost of $25,000.

Therefore, it is optimal to spend $20,000 for Immunization & $40,000 for Screening.

Immunization Screening Total Expense ($) Benefit ($) Expense ($) Benefit ($) Expense ($) Benefit ($) 10,000 60,000 50,000 100,000 60,000 160,000 20,000 90,000 40,000 80,000 60,000 170,000 30,000 115,000 30,000 60,000 60,000 175,000 20,000 135,000 40,000 40,000 60,000 195,000 50,000 150,000 10,000 20,000 60,000 170,000

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