Question

1.   Scans of internal organs using magnetic resonance imaging (MRI).  These devices are often covered by subsidized health insurance programs such as Medicare.  Consider the following table illustrating hypothetical quantities of individual MRI testing procedures demanded and supplied at various prices.  Answer the following questions

Price	Quantity Demanded	Quantity Supplied
$100	100,000	40,000
$300	90,000	60,000
$500	80,000	80,000
$700	70,000	100,000
$900	60,000	120,000

1. In the absence of a government-subsidized health plan, what is the equilibrium price and quantity of MRI tests?

2. Suppose that the government establishes a health plan guaranteeing that all qualified participants can purchase MRI tests at an effective price to the individual of $100 per test.  How many MRI tests are now demanded?  Is the result in the market a surplus or shortage?

Answer 1