the walk-in clinic always has 3MDs and 8 RNs working at it 24 hour clinic, which
ID: 1250942 • Letter: T
Question
the walk-in clinic always has 3MDs and 8 RNs working at it 24 hour clinic, which serve customers with minor emergencies and ailments. The clinici has hired an efficiency expert to examin its operationis and make suggestions for reducing costs.for some of the med procedures done at the clinic, experienced nurses can perform the medical tasks approx as well as the physician can. as long as the nurses are supervised by MDs. Since MDs are more highly trained than nurses, the margical products of MD is higher than the marginal products of RNs.
The manager of the clinic is confused by the efficiency consultant's report because the report recommends using more RNs and fewer MD to loer the cost of providing a given level of medical services. Under what circumstances would it be economically efficient for the clinic to use more RNs and fewer MDs. (given MP (MD)> MP (RN). Explain.
Explanation / Answer
Even if the marginal product of MDs is greater than the marginal product of RNs, if the marginal cost of MDs is significantly lower than the marginal product of RNs (which it is), than the clinic should use more RNs and fewer MDs. For example, let us say that it takes a nurse 2 hours to do a procedure that it takes a doctor 1 hour to complete. If nurses and doctors were paid the same amount, clearly the doctors would be preferable. However, if the doctor's salary is $50 dollars an hour, and a nurse's salary is $20 an hour, then the total procedure would cost the clinic $40 if a nurse did it ($20 per hour times 2 hours), but it would cost $50 for the doctor to do it ($50 per hour times 1 hours). It would be economically efficient for the clinic to use more RNs and fewer MDs if the marginal cost of the RN is comparatively lower than the marginal product of the MD is high.
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