Price Controls for Medical Care. Consider a town where the equilibrium price of a doctors visit is $60 and the equilibrium quantity supplied is 90 patient visits per hour. For suppliers (doctors), each $1 increase in price increases the quantity supplied by two visits. For consumers, each $1 increase in price decreases the quantity demanded by one visit. Suppose that in an attempt to control the rising costs of medical care the government imposes price controls, setting a maximum price of $50 per visit.

a. Use a completely labeled graph to show the effects of the maximum price on (a) the quantity of visits to doctors and (b) the total surplus of the market.

b. What sort of inefficiencies does the price control cause?

c. Would you expect patients and doctors to find ways around the maximum price?