After a Natural Disaster Destroyed One of the 10 Hospitals

question 112

Multiple Choice

After a natural disaster destroyed one of the 10 hospitals in a city and injured nearly 75 percent of the population,what would you expect to happen to the price and quantity of medical services,ceteris paribus?

• A) There would be no expected changes to equilibrium price or quantity.
• B) Equilibrium price would rise because supply would slightly decrease and demand would dramatically increase.The effect on equilibrium quantity is ambiguous.
• C) Equilibrium price would fall because supply would slightly decrease and demand would dramatically increase.The effect on equilibrium quantity is ambiguous.
• D) Equilibrium price would rise and quantity would unambiguously fall because supply would slightly decrease and demand would dramatically increase.
• E) Equilibrium price would fall and quantity would unambiguously rise because demand would decrease and supply would remain constant.

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Definitions:

Break-even Units

The number of units a company must sell to cover all its costs, with no profit or loss.

Variable Costs

Expenses that vary directly with the level of production or sales volume, such as materials or labor directly involved in producing a product.

Selling Price

The amount of money charged for a product or service, or the sum for which something is offered for sale.

Profit Increase

A financial metric indicating an augmentation in a company's earnings over a specific period.