Question 2
Consider the market for dental services in Clementimah. One (1) licensed dentist provides the following supply of dental services: Q = 0.5P – 20. There are 10 licensed dentists in Clementimah. The market demand for dental services is Q = 200 – 3P.
(a) Determine the equilibrium market price, quantity, and consumer and producer surplus in the market for dental services. Illustrate these on a well-labelled graph. Hint: In computing the market supply of dental services, review your course materials on how to combine the supply provided by each individual dentist to form a market supply curve. (8 Marks)
(b) The Clementimah Dental Council sets prices at $60 per quantity and all dentists charge this price. What is the market quantity, and the consumer and producer surplus? Illustrate these on a well-labelled graph. Discuss and explain the effects on welfare (surplus) compared to the market equilibrium in (a). (8 Marks)
(c) Instead of setting prices as in (b), the Clementimah Dental Council could instead restrict the number of dentist licenses to keep prices high. Calculate the number of dentist licenses that must be issued to obtain a market equilibrium price of $60. Hint: Since the demand curve stays the same, first determine the quantity demanded at a price of $60, then solve for the number of dental licenses that produces a supply curve with the same quantity supplied at a price of $60. (4 Marks)
(d) The Clementimah Dental Council argues price-setting/licensing restrictions are needed for dentists to earn enough to pay for their costly training. They say Governments provide similar restrictions for inventors of patents and intellectual property, which are costly to develop. Critically discuss this claim. (5 Marks)
(e) Briefly outline a past case in competition regulation in Singapore involving anti-competitive conduct, and where the Competition Commission ruled against the industry. Identify the main economic reason given for the competition commission’s ruling. Then, provide a short appeal against the competition commission’s ruling. You may find a list of past cases by the Competition and Consumer Commission of
Singapore at https://www.cccs.gov.sg/public-register-and-consultation/public-register/anti-competitive-agreements; please attach the Media Release as an appendix to your GBA submission. Note: Your chosen case may cover economic concepts from SU5 and SU6. Although these SUs do not form part of this GBA, your answer may make reference to these concepts if needed – but there is no expectation that your answer covers these concepts. (15 Marks)
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