Mandatory Insurance. Consider a hospital with 500 doctors and a perfectly competitive market for malpractice insurance. The demand curve for malpractice insurance is linear and negatively sloped, with...

Mandatory Insurance. Consider a hospital with 500 doctors and a perfectly competitive market for malpractice insurance. The demand curve for malpractice insurance is linear and negatively sloped, with a slope of –$50 per case. At the initial price of $3,000, half the hospital’s doctors (250 doctors) buy insurance. The price is just high enough to cover all the costs of providing insurance, including a 50 percent premium to cover costs associated with uninsured doctors. Suppose the hospital makes malpractice insurance mandatory. Predict the new equilibrium