Assume dental care is provided by a competitive industry.A new government regulation requires each dentist to take a costly new exam for certification.What happens to the price of dental care?

Question

Quizplus · Accepted Answer

In the short run, the dentists will have to incur the cost of the new exam, which will increase their costs, but they may not immediately increase prices. However, in the long run, some less efficient dentists may not be able to afford the new exam and may exit the market, reducing the supply of dental care. With reduced supply and constant demand, the equilibrium price will rise, resulting in higher prices for dental care. Therefore, there will be no change in the short run, but dentists will exit and prices will rise in the long run.

Assume Dental Care Is Provided by a Competitive Industry