Scans of internal organs using magnetic resonance imaging (MRI) devices are often covered by subs
Scans of internal organs using magnetic resonance imaging (MRI) devices are often covered by subsidized health insurance programs such as Medicare.
| Quantity | Quantity | |
| Price | Demanded | Supplied |
| $100 | 100,000 | 40,000 |
| $300 | 90,000 | 60,000 |
| $500 | 80,000 | 80,000 |
| $700 | 70,000 | 100,000 |
| $900 | 60,000 | 120,000 |
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?
