When you remove the thermometer to take a reading, the mercury in the bulb contracts, but the constriction in the bottom of the tube stops the mercury leaving the section of the tube next to the scale, allowing you to take a leisurely reading.It returns the mercury, or other liquid, to the lowest, or neutral point, so that the next reading will be accurate, and not affected by the previous one

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There are two reasons why the doctor dips in alcohol before use. The first is that any infections of the previous patient may have does not infect others. 
The second is that the mercury level should fall down to below 35 degrees centigrade before use.
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The liquid is an alcohol based disinfectant. This liquid cleans the thermometer.
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