Government payment of a per-unit subsidy for health care services causes

Question

Quizplus · Accepted Answer

When the government pays a per-unit subsidy for health care services, it effectively lowers the cost of providing each unit of care, which in turn decreases the price that patients pay for these services. This reduction in price increases the quantity of health care services demanded, moving the market along the demand curve. Therefore, the correct answer is D, only an increase in the quantity of health care services demanded above the quantity demanded in the absence of the subsidy. Neither the supply curve nor the demand curve itself shifts. However, the subsidy does have the effect of lowering the price that health care service providers receive for each unit of care, since the government is covering a portion of this cost.

Government Payment of a Per-Unit Subsidy for Health Care Services