Suppose the Demand Curve for Medical Care Services Is Perfectly

question 4

Multiple Choice

Suppose the demand curve for medical care services is perfectly inelastic. What will happen to the equilibrium price and quantity if supply increases?

• A) Price and quantity will rise.
• B) Price will stay the same and quantity will rise.
• C) Price and quantity will fall.
• D) Price will fall and quantity will increase.
• E) Price will fall and quantity will stay the same.

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Definitions:

Marginal Product

The additional output that is produced as a result of utilizing one more unit of a variable input, holding other inputs constant.

Equilibrium Quantity

The level of goods or services offered and demanded at the price of equilibrium.

Labor

The effort involving both mental and physical capacities of humans utilized in creating goods and services.

Marginal Productivity Theory

A principle in economics that states the compensation of a factor of production, like labor, depends on the marginal productivity of that factor.