-Refer to the above figure. Medicare subsidies have increased the price of medical services to Ps. Which of the following statements is TRUE about the effect the Medicare subsidy has had on the consumption of medical services?
A) The amount of medical services provided has decreased from Q0 to Qd as a result of the subsidy.
B) The amount of medical services provided has increased from Q0 to QM as a result of the subsidy.
C) The amount of medical services provided has increased from Qd to QM as a result of the subsidy.
D) The amount of medical services provided has remained unchanged as a result of the subsidy.

Question

-Refer to the above figure. Medicare subsidies have increased the price of medical services to Ps. Which of the following statements is TRUE about the effect the Medicare subsidy has had on the consumption of medical services?
A) The amount of medical services provided has decreased from Q0 to Qd as a result of the subsidy. 
B) The amount of medical services provided has increased from Q0 to QM as a result of the subsidy. 
C) The amount of medical services provided has increased from Qd to QM as a result of the subsidy. 
D) The amount of medical services provided has remained unchanged as a result of the subsidy.

Quizplus · Accepted Answer

Subsidies generally lower the effective price paid by consumers, increasing demand. Therefore, the quantity of medical services provided would increase from the original quantity (Q0) to a new, higher quantity (QM) due to the subsidy.

-Refer to the Above Figure