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ID: 1141693 • Letter: T
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22. Consider the market for emergenay health care services. Assume that a ne t federal aw is g significant financial people to ingest personal risk and for no good reason, dertergent pods. As a resut we expect to A an ambiguous price efflect and an increase in the equilibrium quanitity of services B. an inorease in both the equilibrium price and quantity of services .anincrease price and an antiguon enect on the osanum quinthofter ces D. an increase in the equlibrium price and a decrease in equlibriam quanity of services E. a decrease in both the equilibrium price and quantity of services 23. Assume that a market is desorbed by the tollowing two equations, where P represents price (in dollars) and O represents quantity (in units) Demand: -s- Supply: Qs-7 The equilibrium quantity in this market is A. 1 B. 5 C. 4 D. 3 E 2. 24. A car insurance company is willing to offier accident-free drivers a discount. This is an example of A a negative incentive. positive incentive. C. moral hazard D. an opportunity cost E. an indirect incentive. 25. Adam Smith wrote and published his famous magnum opus, An Inquiry into the Nature and Causes of the Wealth of Nations" in the: A. 20 century. B. 19h century C. 18h century D. 17h century E. 16 century.Explanation / Answer
22. Increase in healthcare providers will increase the supply and also as people are not idigesting detergent pods implies there will be more demand of healthcare as they are highly prone to get sick because of pods. Thus increase in demand also takes place. When supply increases the supply curve shifts and demand increases then demand curve shift both roght side .Now the change in price will depend upon magnitude of increase in both supply and demand. If they both increase equally there will be no effect on price.If demand increases more than increase in supply then there will be rise in price and vice versa in opposite case. Whereas it is always certain that both increases will bring increase in output.
Thus, Option A is correct.
23. Equilibrium occurs when demand equals supply, thus
5 -P/2 = -7 + 5P/2
12 = 4P/2
P = 6
now put P = 6 into either demand or supply function -
Q = 5 - P/2 = 5 - 6/2 = 5-3 = 2
Option E is correct.
24. A discount to accident free drivers will encourage drivers to reduce risk of egtting caught into accidents which is positively motivating.
Its a positive incentive.
Option b is correct.
25. It was fisrt publsihed in 18th century.
Option C is correct.
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