Presently, AFC has on its medical staff 10 doctors and 10 nurses. The daily wage of a doctor is $800, whereas a nurse is paid only $200 a day.

a. Write the equation for the medical isocost of AFC.

b. It has been estimated that an additional doctor could increase the daily output of the clinic by 30 patients, while an additional nurse would increase the number of patients served in a day by only 10. What is the marginal rate of substitution between doctors and nurses?

c. Is the mix of doctors and nurses the clinic is presently using optimal? Explain.

d. Suppose the clinic wishes to expand its operation. Would you recommend that the clinic increase the numbers of its nurses and doctors equally? Explain.

e. Now suppose as a result of an increase in the number of foreign doctors immigrating into the country the daily wage of doctors has dropped to $500. Should this change the hiring practices of the AFC? Explain.

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Hubert KochLv2

13 Jul 2018

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Related questions

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 230. The weekly salary of a practical nurse is $1500.

a. 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 $120 for each patient it treats, should AFC hire more nurses? Explain.

d. Again assuming that on average the clinic receives $120 for each patient it treats, what would be the maximum weekly salary AFC would be willing to pay to each of the two additional nurses?

beigebear261

Question:

Is it true that in a short-run production process, the marginal cost curve eventually slopes upward because firms have to pay workers a higher wage rate as they produce more output? Explain your answer.

Answer:

The marginal product of labor is the increase in output resulting from a one-unit increase in the amount of labor employed. In my own opinion, the statement can be true in the sense that, as the firm produces more and more the cost of production has to come down first; that becomes constant or minimum and then starts to increase. The marginal cost is also a U-shaped curve that first falls then reaches a minimum and starts rising. The reason for rising marginal costs in the short term will only be an increase in the wages as the only factor which is variable in the short-run is labor whereas all factors are kept fixed, so the fixed costs will keep coming down. If you increase labor, you are going to suffer from diminishing marginal returns. And in the long-run, one will suffer diminishing returns from both input factors, labor, and capital.

The short-run cost relationship between the marginal product of labor and the marginal cost, the labor is variable. We have already established that there are diminishing marginal returns because the labor decreases. To increase output in the short-run, a firm must increase the amount used of a variable input. The marginal product reduces, not because consecutive workers are lesser, but because more workers are being used relative to the amount of equipment that is available, what they have left to work with. An example; if a clinic has only one dentist on duty and several assistants are available and we have a lot of patients waiting to see that doctor, the number of patients served by this office cannot increase without limit. The excess assistants will not be able to increase the number of patients in the office, not because they are not reliable or good enough, but because they cannot perform the doctor's job, and there is only one doctor in the office.

https://www.quora.com/Why-does-the-marginal-cost-curve-slope-upwards

I need a peer reply for this.