The consultants of Allcare Family Clinic (AFC) have determined that if the clini

Question

The consultants of Allcare Family Clinic (AFC) have determined that if the clinic hires two more practical nurses, without any other changes in its operation, it can increase the number of patients it treats during a week from 200 to 220. The weekly salary of a practical nurse is $1500.

What is the weekly marginal product of a practical nurse?

b. Assuming nurses are the only variable input, what is the (short-run) marginal cost of AFC?

c. If, on average, the clinic receives $160 for each patient it treats, should AFC hire more nurses? Explain.

d. Again assuming that on average the clinic receives $160 for each pateint it treats, what would be the maximum weekly salary AFC would be willing to pay to each of the two additional nurse?

Explanation / Answer

a.) The marginal product is 10 patients for a practical nurse b.) The short run cost for AFC is $3000 weekly c.) They should, because they will be making an extra $160*20 = $3200 revenue for only $3000 in expenses. d.) AFC should be willing to pay up to $1600 weekly for each of the two nurses.

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