Pearson eText Microeconomics -- Access Card
2nd Edition
ISBN: 9780136849513
Author: Acemoglu, Daron, Laibson, David, List, John
Publisher: PEARSON
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Question
Chapter 16, Problem 2P
(a)
To determine
Whether insurance company would suffer a loss if service was offered for
(b)
To determine
Reason for driving out of low risk people and total surplus.
(c)
To determine
Total surplus when a price of
(d)
To determine
Nature of the individual mandate: Equity or efficiency.
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Students have asked these similar questions
Economics
Use the following information to determine the
costs to you and/or to the insurance company for
the following occurrences:1) You have $500 per
person Wellness Benefit.2) You have a $500
İndividual Deductible and your family (spouse and
children) has a $500 Family Deductible.3) You have
a $10,000 annual Maximum Family Out-of- Pocket
expense provision.4) Once you have met your
Individual or Family Deductible, your insurance will
pay 80% of the expenses and you will pay 20% as
your co-pay.Unless the occurrence is a Wellness
expense, you and/or your family have to meet
their deductibles first before insurance will pay
anything. Example:Assume that you have met your
deductible, and you go to the Emergency Room
for a large cut on your shin which required
cleaning, 20 stitches, a tetanus shot, and
antibiotics. (80/20 plan)Total Charges = $2,500
totalYour Responsibility = $2,500*.20 = $500 (goes
toward your Max Out of Pocket)Insurance
Responsibility = $2,500*.80 = $2,000
Question:…
Suppose that a person's utility function is the square
root of wealth. Suppose the person earns $100,000
per year. He or she has an illness with a probability of
0.2, and the cost of the treatment is $30,000. Would
the person pay $6,000 for insurance? Why or why not?
What is the most this person would pay to be insured
(hint: equate expected utility to utility with certainty)?
Suppose their utility function changed to wealth
squared (hint: are they now risk averse?). Would they
pay $6,000 for insurance? Why or why not?
You start an insurance company as your first entrepreneurial venture after graduation. Your main product line is malpractice insurance for dentists. After exhaustive research, you learn that settling malpractice claims against careful dentists costs $2,000 and settling malpractice claims against reckless dentists costs $7,500. Individual dentists know whether they are reckless or careful, and your research shows that approximately 20% of dentists are reckless. How much do should you charge for malpractice insurance to break even?
Chapter 16 Solutions
Pearson eText Microeconomics -- Access Card
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- John owns and runs a food truck, which he expects to increase his wealth to $40,000 this year. John knows that every year, there is a 20% chance that his truck will be firebombed by one of his ruthless food truck competitors. If this happens, he will face a bill of $10,000 in repairs and lost income. John can choose to get insurance to cover all repair costs and lost wealth. Use this information and the information in the table and graph to answer the questions. Total utility Wealth Total utility (utils) 730 1000 $32,000 900 $34,000 755 800 700 $36,000 785 600 792 500 $38,000 400 300 200 100 0 $5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000 55,000 Wealth What is John's expected wealth? expected wealth: $ What is the price for John's insurance? price of insurance: $ What is John's expected utility without insurance? expected utility: 730 If John chooses to pay the insurance policy price, what would be his total utility? total utility: 1030 42000 10000 utils utilsarrow_forward4. What kind of liability insurance protects you now as an EMT and as a student paramedic in your clinical sites? 5. At the scene of a shooting, you can see a patient with slow, gasping respirations, but the police will not let you enter the crime scene. How will you feel? 6. Your patient is critical, and you cannot secure the airway. Medical direction tells you to divert because they have no ICU beds. You repeat the urgency of your patient's condition and are still told to divert. You elect to override the physician's order and transport to that hospital. Can you justify disobeying the physician's order! .arrow_forwardIn September 2020, Ms. Sarah arranged health insurance. In 2021, Ms. Sarah made a claim for the costs of an MRI and a cortisone injection, because she had a cyst on the left side of her spine. The insurer requested Sarah's medical notes and found she hadn’t disclosed 2 previous spinal injuries from 2013 and 2016. Ms. Sarah didn't inform her insurance company the full details of her medical history and she said that she wasn't aware that she has to disclose her health situation to the insurance company. Therefore, she Made a claim to her insurance company to cover these bills. Required: Determine whether she can claim the hospital expenses under her insurance policy? And justify your answer with reasonable justifications?arrow_forward
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