Given that demand for medical services is given by equation P 250 50Q. The marginal costs for medical services are 25. The marginal external benefits of visiting a doctor are 12.5. Which of the following statements is correct: SELECT THE CORRECT ANSWER Full insurance with 200 deductible will result in the social optimum quantity to be consumed Full insurance is more efficient than no insurance A co-insurance rate of 50% would increase efficiency, but will not result in the social optimum quantity to be consumed A co-payment of 15 is less efficient than a co-insurance rate of 50%

Given that demand for medical services is given by equation P 250 50Q. The marginal costs for medical services are 25. The marginal external benefits of visiting a doctor are 12.5. Which of the following statements is correct: SELECT THE CORRECT ANSWER Full insurance with 200 deductible will result in the social optimum quantity to be consumed Full insurance is more efficient than no insurance A co-insurance rate of 50% would increase efficiency, but will not result in the social optimum quantity to be consumed A co-payment of 15 is less efficient than a co-insurance rate of 50%

EBK HEALTH ECONOMICS AND POLICY

7th Edition

ISBN:9781337668279

Author:Henderson

Publisher:Henderson

Chapter12: Medicare

Section: Chapter Questions

Problem 4QAP

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Suppose a demand curve has the form x = 100 - 10p. If the market price is $5, how would a $200 deductible impact quantity demanded? A. The consumer will behave in the same manner as he would with no insurance and consume 50 services. B.The consumer will behave in the same manner as he would with no insurance and consume 0 services. C.The consumer will behave as if the market price is $0 and consume 50 services. D.The consumer will behave as if the market price is $0 and consume 100 services.
Indicate whether the statement is true, false, or unclear, and justify your answer.Pauly (1974) shows that the socially optimal level of insurance in a market is either full or none, depending on whether moral hazard or risk aversion predominates.
Suppose low-risk individuals are risk-averse enough to fully insure at premiums high enough for insurers to cover both high and low-risk individuals. This is an example of a _____ equilibrium and is an ______ outcome. a-pooling/inefficient b-pooling/efficient c-separating/inefficient. d-separating/efficient
Suppose the equilibrium price for good quality used cars is $20,000. And the equilibrium price for poor quality used cars is $10,000. Assume a potential used car buyer has imperfect information as to the condition of any given used car. Assume this potential buyer believes the probability a given used car is good quality is .60 and the probability a given used car is low quality is .40. Assume the seller has perfect information on all cars in inventory. How does the informational imbalance result in market failure? a. Only good quality cars are sold, hence the market under-provides used cars. b. Both poor and good quality cars are sold, hence the market over-provides used cars. c. Only poor quality cars are sold, hence the market under-provides used cars. d. Both poor and good quality cars are sold, hence the market efficiently provides used cars.
Suppose that Elaine’s demand for doctor visits per year is given by the equation: P = 250 – 20Q, where Q is the number of doctor visits and P is the price. The marginal cost of providing this service is fixed at $130 per patient. What is the efficient level of visits per year? What would be the total cost to provide the efficient level of visits? On a supply/demand graph, illustrate this situation; label the efficient levels from part (a). If Elaine obtains insurance with no deductible and a copayment of $10 per visit, how many times would she visit the doctor per year? In total, how much does Elaine pay out of pocket for her visits and how much does the insurer have to pay? Calculate the deadweight loss resulting from the insurance policy and show this region on your graph. What happens to the size of the deadweight loss as the copayment increases? Briefly explain why the insurance policy can induce moral hazard.
Suppose a company offers a standard insurance contract with a premium (r) of $2,000 and a payout (q) of $10,000. Suppose that Adelia earns a healthy state income of $70,000, a sick state income of $50,000, and has a 20% chance of becoming ill. For Adelia, this insurance contract would be: A. actuarially fair and partial B. actuarially fair and full C. actuarially unfair and full D. actuarially unfair and partial
Consider an individual whose utility function over income I is U(I), where U is increasing smoothly in I (U'>0) and convex (U">0).a. Draw a utility function in U–I space that fits this description.b. Explain the connection between U'' and risk aversion.c. True or false: this individual prefers no insurance to (IS, IH) to an actuarially fair, full contract.
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? Reconsider the previous health insurance question. Of the choices below, which one is closest to the spread between the minimum possible number of reports and the maximum possible reports to achieve the company’s desired outcome? Reconsider again…
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Describe the challenges that adverseselection and moral hazard pose for insurance.