Use the following to answer question(s): The Market for Health Care

-(Exhibit: The Market for Health Care) At price P₃ the total cost of health-care services compared to price P₁ has increased from:
A) OP₃BQ₂ to OP₁AQ₂.
B) OP₁AQ₁ to OP₃BQ₂.
C) OP₃BQ₂ to OP₁AQ₁, and consumers pay OP₁AQ1₂.
D) OP₁AQ₁ to OP₃BQ₂, and insurance pays OP₂CQ₂.

Question

Use the following to answer question(s): The Market for Health Care
 
-(Exhibit: The Market for Health Care) At price P₃ the total cost of health-care services compared to price P₁ has increased from:
A) OP₃BQ₂ to OP₁AQ₂. 
B) OP₁AQ₁ to OP₃BQ₂. 
C) OP₃BQ₂ to OP₁AQ₁, and consumers pay OP₁AQ1₂. 
D) OP₁AQ₁ to OP₃BQ₂, and insurance pays OP₂CQ₂.

Quizplus · Accepted Answer

At price P₁, the quantity demanded is Q₁ and the quantity supplied is Q₂, which creates a surplus. This surplus puts downward pressure on price, leading to a decrease in price from P₁ to P₃. As a result, the quantity demanded increases from Q₁ to Q₃ and the quantity supplied decreases from Q₂ to Q₄, leading to a shortage. The total cost of health-care services has increased from OP₁AQ₁ to OP₃BQ₂.

Use the Following to Answer Question(s): the Market for Health