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1) A clinic is considering reducing its advertising budget by $20,000

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1) A clinic is considering reducing its advertising budget by $20,000. The clinic forecasts that visits will drop by 100 as a result. Costs are $140 per visit and revenues are $180 per visit. Should the clinic reduce its advertising budget?

2) The price elasticity of demand for dental services is –0.25. In a market with 100 dentists, the local dental society demanded and received an 8 percent increase in prices from the dominant dental insurance company. What should happen to the dentists’ revenues and profits? (Assume that AC = MC.) Would this cartel be stable? Explain.