5 a.) Draw a market where consumers demand health insurance and insurance companies supply insurance at a price of insurance called the premium. Explain why, in this model of the insurance market, the individual mandate will cause health insurance premiums to increase.
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- 1. An individual has a health insurance plan with a deductible of $1200 and a coinsurance rate of 50%. Their demand curve is Q=20-(P/10), and the equilibrium market price of medical care is $100 per unit. What quantity of medical care would the individual choose to consume? 2. Suppose that consumers are all risk neutral and so they do not purchase health insurance. The equilibrium price of a doctor visit is $30, the supply of doctor visits is perfectly elastic, and the aggregate demand for doctor visits is given by Q=200-5*P. Calculate the effect that universal perfect health insurance (that is, coinsurance rate=0) would have on social welfare, measured as the sum of consumer surplus plus producer surplus. 3. Consider a version of the Akerlof model in which neither buyers nor sellers observe car quality (though somehow – please suspend your disbelief – both buyers and sellers enjoy higher utility from higher quality cars). For this question, please assume that both buyers…1. Consider the following table, which has data on insurance status and medical expenditures for different types of professors. Assume that the underlying health of all professors did not change much from 2018 to 2019. *image provided* a.) Is there evidence of adverse selection in this market? How do you know?1. Fun with cost-sharing. An important distinction in health insurance is between the list price (PL) and out-of-pocket price (PP) of a medical good or service. The list price is the official price that the provider charges the insurance company, while the out-of-pocket price is the price that the insurance customer faces. Sometimes, the out-of-pocket price depends on the list price. a. Suppose a consumer’s demand for a particular medical procedure is Q = 100 − PP. Draw her demand curve in PL–Q space under the assumption of no insurance and label it D1. You will have to think about the relationship between PL and PP to draw it correctly. b. Now assume the same consumer is fully insured. Think about how this affects the relationship between PL and PP and draw a full-insurance demand curve in PL– Q space. Label this curve D2. c. Finally, assume the consumer is part of a partial insurance plan with a copayment provision. Her insurance pays all expenses above and beyond her copayment of…
- 11) Consider a market for used cars. Suppose there are only two kind of cars: lemons and good cars. A lemon is worth $1,500 both to its current owner and to anyone who buys it. A good car is worth $6,000 to its current and potential owners. Buyers can't tell whether a car is a lemon untilafter they have bought the car. What do economists call the problem that buyers of used cars face? What is the price of a used car? Explain and substantiate your answer. 12) How can a warranty at the seller's expense signal that a product is high quality?4 Suppose that a person’s demand curve for physician office visits is P = 200 – 20Q, where P is the price of an office visit, and Q is the number of physician visits per year. Also, suppose that the marginal cost of an office visit is always $60. c. Suppose this person obtains health insurance. The policy has no deductible, but has a coinsurance rate of 50 percent. How many visits will occur now? d. Suppose that the policy has no deductible but has a $20 co-payment. How many visits will occur now? e. Suppose the policy has a $20 co-payment and a $500 deductible. How many visits will occur now? f. Calculate the deadweight losses in the policies described in parts c, d, and e.1.) Suppose an insurance company wants to charge a very healthy individual a premium of $1,200 a year for health coverage. It also wants to charge a less healthy individual a premium of $3,600 a year for health coverage. It is seeking to ascertain from any given customer information regarding his/her health by asking for several pieces of health-related information, such as doctor assessments of the person’s health, history of health-related problems, etc. The opportunity cost of a very healthy person securing a health report is $250 and the opportunity cost of a less healthy person securing a health report is $650. Of the choices below, how many reports should the company request to best ensure its paying the right premium to the right person? a. 6. b. 2. c. 0. d. 14. 2). Reconsider again the previous health insurance question. Suppose that due to some innovations in technology as well as increased efforts to shorten/streamline patient reports as doctors look for ways to…
- 16. Consider a market in which high-quality and low-quality television sets are sold. Before consumers make a purchase, they do not know the quality of the sets , but the sellers do know . As compared to a situation where both consumers and sellers know the quality of the sets, this situation would ) A)cause no change in the ratio of low to high-quality sets sold B)increase the fraction of high-quality sets sold (C) increase the fraction of low-quality sets sold (D) cause the average price of goods sold to rise.A website offers a place for people to buy and sell emeralds, but information about emeralds can be quite imperfect. The website then enacts a rule that all sellers in the market must pay for two independent examinations of their emerald, which are available to the customer for inspection. How would you expect this improved information to affect demand for emeralds on this website? How would you expect this improved information to affect the quantity of high-quality emeralds sold on the website?Assume that you are in the business of providing medical insurance. You have analyzed the market carefully, and you know that at a price of $6,000 per year, you will sell 40,000 insurance policies per year. In addition, you know that at any price above $6,000, no one will buy your insurance policies because the government provides equal-quality policies to anyone who wants one at $6,000. You also know that for every $1,000 you lower your price, you will be able to sell an additional 10,000 policies. For example, at a price of $5,000, you can sell 50,000 policies; at a price of $4,000, you can sell 60,000 policies; and so on. a. Sketch the demand curve that your firm faces. b. Sketch the effective marginal revenue curve that your firm faces. c. If the marginal cost of providing a health insurance policy is $5,000, how many will you sell and what price will you charge? What if MC = +4,500
- Explain how the opioid epidemic could be ia supply problem caused by the oversupply of prescription pain meds, drug traffickers and illegal drug manufacturers. Draw a graph.3b Discuss whether supplier-induced demand necessarily results in higherprices for medical services, both verbally and graphicallyDraw the demand curve in the market for medical care and upload your picture of your diagram, the horizontal axis should represent the number of medical procedures.) Show the quantity of procedures demanded if each procedure has a price of $100. On your diagram, show the quantity of procedures demanded if consumers pay only $20 per procedure. If the cost of each procedure to society is truly $100, and if individuals have health insurance as described above, will the number of procedures performed maximize total surplus? Explain. Consider how health insurance affects the quantity of healthcare services performed. Suppose that the typical medical procedure has a cost of $100, yet a person with health insurance pays only $20 out of pocket. Her insurance company pays the remaining $80. (The insurance company recoups the $80 through premiums, but the premium a person pays does not depend on how many procedures that person chooses to undertake.)
