Favorable tax policies have encouraged the construction of new hospitals in the United States.How does this affect the equilibrium price and quantity for medical services?

Question

Quizplus · Accepted Answer

The favorable tax policies have incentivized the construction of new hospitals which would increase the supply of medical services. As a result, the equilibrium price for medical services will decrease and the quantity will increase as there is an increase in supply. However, the demand for medical services remains constant, causing a downward pressure on the equilibrium price. Therefore, choice D is the best answer as it correctly states that equilibrium price has fallen and quantity has risen as supply has increased, but demand has remained constant.

Favorable Tax Policies Have Encouraged the Construction of New Hospitals