The figure given below represents demand for and supply of hospital beds in Anytown, U.S.A. , as shown by curves D and S₁in the following figure.If the hospital receives permission to expand, its new supply curve will be S₂.Price level P₁ is the fixed prospective payment reimbursement rate paid by Medicare to the hospital, regardless of actual cost. Figure 32.3 Based on the information given in Figure 32.3, in order to increase its occupancy rate prior to the expansion, this hospital should:

Question

Quizplus · Accepted Answer

Since the hospital cannot increase its price level of P₁ due to fixed prospective payment reimbursement rate paid by Medicare, it can lower the price of certain cost-effective medical procedures to attract more patients. This will help in increasing the occupancy rate of the hospital.

The Figure Given Below Represents Demand for and Supply of Hospital