Reference no: EM132320293

Price discrimination

The setting for this assignment is an imaging service and its pricing for computerized tomography (CT) scans. While CT scans can be done for many different parts of the body, and those scans can be done with or without contrast, this analysis is limited to CT scans of the abdomen and pelvis, with contrast. You have gathered the following information on the costs of providing CT scans: Variable costs per scan Variable labor $100 Variable facility costs $20 Supplies $60 Other $20 Total variable costs $200 Marginal costs are assumed to be constant and equal to the variable costs per scan. Total fixed costs are $350,000 per year. Total costs for the year are the total variable costs (variable cost per scan times the number of scans) plus the total fixed costs. The demand for CT scans depends on whether a potential client has insurance and the level of insurance coverage. You have identified three groups, with the following annual demand functions (i.e., these give the quantity demanded for a year): Group Demand function Low co-pay group Qd = 900 - 0.5P High co-pay group Qd = 1200 - 2P Uninsured Qd = 3000 - 10P Calculate the profit-maximizing price for the low co-pay, high co-pay, and uninsured groups?