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Question
After a natural disaster destroyed nine of the 10 hospitals in a city but injured only 1 percent of the population, what would you expect to happen to the price and quantity of medical services?
a. There would be no expected changes to equilibrium price or quantity.
b. Equilibrium price and quantity would rise because supply would slightly decrease and demand would dramatically increase.
c. Equilibrium price and quantity would fall because supply would slightly decrease and demand would dramatically increase.
d. Equilibrium price would rise because supply would significantly decrease and demand would increase only slightly. The effect on equilibrium quantity is ambiguous.
e. Equilibrium price would fall and quantity would rise because demand would decrease and supply would remain constant.
Answer
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