Question

What would happen if, in order to provide lower cost healthcare, the government decided to set a price ceiling (Pmax) in the health insurance market?

  1. What is the effect of this maximum price legislation on the market for health insurance?
  2. Briefly explain the situation for both consumers and producers (i.e. healthcare providers).
  3. What might the government do to achieve their intended aims (i.e. lower costs and increased quantity)?

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