Economics For Healthcare Managers
Economics For Healthcare Managers
4th Edition
ISBN: 9781640550483
Author: Robert H. Lee
Publisher: Health Administration Pr
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Chapter 5, Problem 10E
To determine

Calculation of average and incremental cost.

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You are comparing replacing the current lab, which has a cost function of C = 200,000 + 25 × Q, with an automated lab that has a cost function of C = 300,000 + 20 × Q. Doing so would reduce the error rate from 1.5 percent to 1 percent. Your volume is expected to be 18,000 tests per year. Should you choose the automated lab? Briefly explain your logic.
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