1. Scans of internal organs using magnetic resonance imaging (MRI) 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, and then answer the questions that follow.

Price Quantity Demanded Quantity Supplied

$200 200,000 80,000

$400 180,000 120,000

$600 160,000 160,000

$800 140,000 200,000

$1,000 120,000 240,000

A. In the absence of a government-subsidized health plan, what is the equilibrium price of

MRI tests?

B. In the absence of a government-subsidized health plan, what is the amount of society's total

spending on MRI tests?

C. The government establishes a health plan guaranteeing that all qualified

participants can purchase MRI tests at an effective price (that is, out-of-pocket cost) to

the individual of $200 per test.How many MRI tests will people want to consume at an

effective price of $200?

D. What is the per-unit price that induces producers to provide the number of MRI tests

demanded at the government-guaranteed price of $200?

E. (See C and D above) what is society's total spending on MRI tests?

F. Under the government's coverage of MRI tests, what is the total subsidy that the government pays to support MRI testing at its guaranteed price?

2- Describe the relationship between average physical product and average total costs in the table below

Input of Labor Average Physical Product Average Total Costs

1 25 2.40

2 30 1.58

3 28.33 1.76

4 26.25 2.10

5 23 2.83

6 20 3.88

3- Describe the relationship between marginal costs and average total costs in the table below

Output Total Cost Marginal Costs Average Total Costs

0 10

25 60 2.00 2.40

60 95 1.00 1.58

85 150 2.20 1.76

105 220 3.50 2.10

115 325 10.50 2.83

120 465 28.00 3.88