ernal organs using magnetic resonance int 4. Scans of imaging (MRI) devices are
ID: 1139008 • Letter: E
Question
ernal organs using magnetic resonance int 4. Scans of imaging (MRI) devices are often covered by subsi- dized health insurance programs such as Medicare. Consider the following table illustrating hypo thetical quantities of individual MRI testing pro- cedures demanded and supplied at various prices, and then answer the questions that follow. Price Quantity Demanded Quantity Supplied $100 $300 $500 $700 $900 100,000 90,000 80,000 70,000 60,000 40,000 60,000 80,000 100,000 120,000 e absence of a government-subsidized health plan, what is the equilibrium price of tests? What is the amount of society's total a. In th MRI spending on MRI tests? . Suppose that the government establishes a health plan guaranteeing that all qualifiedExplanation / Answer
a. The equilibrium price is $500 because at this price quantity demanded = quantity supplied i.e. 80,000 units.
Total spending = 500 * 80000 = $40,000,000
b. At price of $100 the quantity demanded is 100,000 units and the quantity supplied is 40,000 units. Since the quantity supplied has to be 100,000 after the subsidy, the consumption will be 100,000 units.
c. At price of $100 the quantity demanded is 100,000 units so for production of 100,000 units the price per MRI has to be $700.
Total spending = 700 * 100,000 = $70,000,000
d. Per unit subsidy is = $700 -$ 100 = $600
Total subsidy = $600 * 100,000 = $ 60,000,000
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