Under the following conditions, what are the equilibrium price and quantity of health care goods? There are many health care patients but only one private for-profit hospital

We first compute the equilibrium in a competitive market, where firms set price equal to marginal cost. In this market, the equilibrium quantity is given by:

• 24 - 2Q = 2Q
• 24 = 4Q
• Q = 6

and the market price = 2 * 6 = 12.

Given that the current market has only one producer (hospital), the optimal quantity set by the hospital is such that the marginal revenue is equal to marginal cost, i.e.,

• 24 - 4Q = 2Q
• 24 = 6Q
• Q = 4

and the equilibrium price = 24 - 2*4 = 16.

The deadweight loss = (6 - 4) *(16 - 12) / 2 = $4.