The state of California recently considered passing a tax on
doctors for their services in that state in order to raise revenue
to pay for universal health coverage for California residents.
Suppose the average open heart surgery costs $100,000, and at that
price 23,339 surgeries are performed each year.
For the purpose of this analysis, assume that people could get the
surgery elsewhere.
Which curve on the supply and demand graph would shift? What
happens to producer and consumer surpluses? What happens to
deadweight loss? Fully explain what the most likely outcome would
be in this market if a tax on surgeries is implemented. Use a graph
if it will help.
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