A clinic has incremental costs per case of $10 and overhead costs $100,000. It faces price elasticity of demand of -2.
a. What is the clinic's profit-maximizing price?
b. How would the profit-maximizing price change if overhead costs doubled?
c. With excess capacity, would serving Medicaid customers for a fee of $16 make sense?
d. How would the profit-maximizing price change if Medicaid raised its fee to $18?