The Akerlof model can be used to model the health insurance market. In this market, which party is analogous to car buyers? Which party is analogous to car sellers?What would it mean for the health insurance market to unravel?
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The Akerlof model can be used to model the health insurance market. In this market, which party is analogous to car buyers? Which party is analogous to car sellers?What would it mean for the health insurance market to unravel?
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- While the Lindahl model (equilibrium) can be analogous to the market for private goods, they have interesting differences. How do we interpret Q1 in the diagram? What about S?The Grossman model envisions consumers deciding between investments in health H and investments in home goods Z. Figure below depicts a typical consumer’s production possibility frontier for health and home goods.a. Succinctly describe why the graph is shaped the way it is between points A and B.b. Succinctly describe why the graph is shaped the way it is between points B and C.c. Would any consumer with typical preferences ever pick a point on the graph between A and B? Explain succinctly why or why not.True or false? According to the Grossman model, if a new drug were discovered that eliminated the steady deterioration of health that accompanies aging – but does not eliminate sudden events like heart attacks or being hit by a bus – then the demand for jelly donuts, french fries, and physical activity in the presence of buses would decline. Justify your answer.
- One curious finding from the RAND Health Insurance Experiment was that the rate of treated bone fractures per capita was higher in the group of families that had been assigned to the free insurance plan, compared with those in the high copayment plans. Concisely describe how the Grossman model might explain the fact that people facing higher prices for health care would break bones less often. Be sure to discuss the concept of marginal efficiency of health investment.The Grossman model envisions consumers deciding between investments in health H and investments in home goods Z. Figure below depicts a typical consumer’s production possibility frontier for health and home goods. a. Would any consumer with typical preferences ever pick a point on the graph between A and B? Explain succinctly (using Figure attached) why or why not. b. Succinctly describe why the graph is shaped the way it is between pointsA and B.c. Succinctly describe why the graph is shaped the way it is between points B and C.I do not need the graph, just help with the explanation. Thank you:) A tax on healthy people. Consider the basic Rothschild-Stiglitz model with asymmetric information and robust and frail customers. Suppose the government imposes a Wellness Tax τ > 0, on robust and frail types but collects on this tax only when they are healthy (that is, there is no tax if they turn out to be sick). Will a separating equilibrium still be possible? Draw a version of the Rothschild-Stiglitz diagram to support your answer.
- Indicate whether the statement is true or false, and justify your answer.In the Grossman model, the marginal efficiency of investment in health care declines as health improves.The Grossman model emphasizes the important roles that education, health knowledge, and expectations about future income and health play in the choices that determine health in both the short and long runs. Education both increases the likelihood of having higher income, which is good for health, and can compensate for lower income in which of the following ways: a. Education is associated with better health literacy, knowledge and execution of healthy diets and lifestyles b. Education enables people to communicate better with well-educated doctors and so they learn better how to manage their own health over time c. Education enables people to read about side effects and avoid unnecessarily risky procedures d. All of the above e. None of the aboveOne major premise of the Rothschild–Stiglitz model is that there is a perfectly competitive market for health insurance. Suppose instead that the market is not perfectly competitive, and in fact competitor firms have a hard time entering the market. Could a pooling equilibrium occur in this case? What is it about competition that prevents pooling in the Rothschild–Stiglitz model? No formal proof is necessary, but do make your reasoning clear. Evaluate the following statement: competition in health insurance markets is harmful.
- Suppose there is a new preventative treatment for a common disease. If you take the preventative treatment, it reduces the average amount of time you spend sick by 10%. In the Grossman model, we would say that this shifts your productive time budget to the ______ and that your PPF _____. a. left; expands outward b. right; expands outward c. left; shrinks inward d. right; shrinks inwardIn the early 2000s, the state of Massachusetts in the U.S. implemented a health reform aimed at enrolling people without health insurance into an insurance plan. The reform required people without health insurance (at least those who could afford it) to buy insurance, and put in place penalties on those who nevertheless chose not to buy insurance. Below is the abstract of a recent National Bureau of Economic Research working paper entitled “Health Reform, Health Insurance, and Selection: Estimating Selection into Health Insurance Using the Massachusetts Health Reform” by Martin Hackmann, Jonathan Kolstad, and Amanda Kowalski. The authors conducted a study of the effects of the Massachusetts reform. They write: We implement an empirical test for selection into health insurance using changes in coverage induced by the introduction of mandated health insurance in Massachusetts. Our test examines changes in the cost of the newly insured relative to those who were insured prior to the…Which of the following is NOT a defining characteristic of the Beveridge model? a. universal, public health insurance b. community rating c. publicly provided health care
