In a Town with Only One Hospital,the Largest Employer (A

question 110

Multiple Choice

In a town with only one hospital,the largest employer (a local manufacturing plant) now offers health insurance to its employees.What would be the expected change to the price and quantity of medical services?

• A) Equilibrium price and quantity would not be affected.
• B) Equilibrium price and quantity would rise because supply and demand have decreased.
• C) Equilibrium price and quantity would fall because supply has decreased but demand has increased.
• D) Equilibrium price and quantity would rise because demand has increased but supply has remained constant.
• E) Equilibrium price would fall and quantity would rise because demand has decreased and supply has remained constant.

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Definitions:

Short Run

A term in economics referring to a time frame in which certain resources, particularly capital, are fixed and cannot be adjusted.

Socially Optimal Price

The price point at which the social welfare (total benefits to society) is maximized, often considered when analyzing the impact of public goods or services.

Pure Monopoly

A market structure where only one supplier provides a unique product or service, thereby controlling the entire market.

Profit-maximizing Price

The price at which a firm can sell its product to earn the highest possible profit, considering its cost structure and market demand.