The American Medical Association is considering putting a permanent cap on the number of medical residents (which effectively would cap the number of licensed doctors). What effect would this cap have if it were set below the current number of doctors?

Answer: 3) Higher wages for existing and future doctors

Options: 1) Lower wages for existing and future doctors

2) Higher wages for existing doctors

3) Higher wages for existing and future doctors

4) The cap would have no impact on wages for doctors

Explanation: A permanent cap on the number of resident medical residents which will in turn put a permanent cap on the number of licensed doctors will limit the number of medical doctors in the U. S. If this were set below the current number of doctors, this will lead to an increase in wages for existing doctors as well as future doctors.

Setting a ceiling on the quantity of a good or service which is below the equilibrium results in higher prices, in this case the wages of doctors.

Caps are used in limiting prices and quantities but but when used in limiting quantities, it may have adverse effects on prices for consumers. An example of when price ceilings are effective is rent. Quantity caps are usually used by cartels to limit total quantity available to the market.

If a limit on the number of doctors is set below the current one, this would result in an overflow of doctors and nowhere to place them. This would result in unemployment. The current doctors would have to compete for jobs that are limited. Unemployment can lead to a lot of other social and economic problems.