In a Town with Only One Hospital, the Largest Employer

question 106

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 has 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:

Trend Analysis

A type of horizontal analysis that deals with percentage changes in items on the financial reports for several years. This analysis uses a base year to calculate the percentage change of each item.

Gross Profit

The financial metric representing the difference between revenue and the cost of goods sold, before accounting for other expenses.

Vertical Analysis

A financial statement analysis method where each entry for each of the three major categories of accounts (assets, liabilities, and equities) in a balance sheet is represented as a proportion of the total account.

Cost Of Goods Sold

Refers to the total expense directly related to the production of goods or services a company sells.