Scans of internal organs using magnetic resonance imaging (MRI) devices are often covered by subsidized health insurance
Question:
a. In the absence of a government-subsidized health plan, what is the equilibrium price of MRI tests? What is the amount of society's total spending on MRI tests?
b. Suppose that the government establishes a health plan guaranteeing that all qualified participants can purchase MRI tests at an effective price (that is, out-of-pocket cost) to the individual of $100 per test. How many MRI tests will people consume?
c. What is the per-unit price that induces producers to provide the amount of MRI tests demanded at the government-guaranteed price of $100? What is society's total spending on MRI tests?
d. Under the government's coverage of MRI tests, what is the per-unit subsidy it provides? What is the total subsidy that the government pays to support MRI testing at its guaranteed price?
Step by Step Answer: