The city of San Alameda provides free health care services for the medically indigent (poor and uninsured).Suppose the city has $2 million to spend on these services and private goods.One unit of health care services (e.g. a physician office visit) costs $110.Thus, the budget equation for San Alameda for these two types of goods is:

$2 Million = $P + $110H,

where H is the units of indigent health care services provided, and P is total expenditure on private goods (P is measured in dollars because we assume each unit of P costs $1).

1. If the San Alameda spends equal amounts on indigent health care services and the private good, how many units of health care services are purchased by the city?

2. Suppose the city of San Alameda receives a 40-percent matching grant from the state for spending on indigent health services.Specifically, the state spends $0.40 on indigent health care services for every $1 spent by the city on these services.

(a) If, after receiving the grant, San Alameda spends $1 million on the private good, how many units ofindigent health care services are purchased?round to nearest whole number

(b) Under the matching grant, how much of total indigent health care expenditures is paid by the state?

(c) What is the effective price of health care services for the city of San Alameda under the matching grant?

3. Suppose, instead of a matching grant, the state provided the city of San Alameda a block grant equal to what the state would have spent with the matching grant (2b. above).

(a) How many units of indigent health care services are purchased by San Alameda?

4. Using relevant economic concepts, explain why a matching grant generally leads to more consumption of a public good than an unrestricted block grant.