Health Economics
14th Edition
ISBN: 9781137029966
Author: Jay Bhattacharya
Publisher: SPRINGER NATURE CUSTOMER SERVICE
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Chapter 3, Problem 14AP
To determine
The impact of new drug that eliminate the deterioration of health.
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Indicate whether the statement is true or false, and justify your answer.In real life, investments in health can generate long-lasting benefits, but the Grossman model neglects this aspect of health.
Indicate whether the statement is true or false, and justify your answer.In the framework of the Grossman model, an individual’s level of health is completely controlled by her actions. Thus, in any given period, an individual is unconstrained in her choice of health status.
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.
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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?arrow_forwardIndicate whether the statement is true or false, and justify your answer.The Rothschild–Stiglitz model predicts that people who own life insurance should have fewer unobserved traits (that is, unobserved by insurance companies) that lead to a higher risk of death when compared against people with the same level of income but who do not own life insurance.arrow_forwardIndicate whether the statement is true or false, and justify your answer. In the Grossman model, optimal health status declines with age.arrow_forward
- 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.arrow_forwardSuppose 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 inwardarrow_forwardIn what sense is the individual considered a “producer” of health in the Grossman model?arrow_forward
- How can the New York sick leave law impact the use of emergency rooms? Reference the Grossman model for guidance.arrow_forwardAn empirically testable hypothesis for additional health care expenditure as an investment rather than as an expense is: a. If an increase in health care expenditure today results in an increase in productivity tomorrow, then health careexpenditure has an investment effect. b. If an increase in health care expenditure today results in an a rise in health care stock prices, then health care expenditure has an investment effect. c. If an increase in health care expenditure today results in worse health outcomes today, then health care expenditure has an investment effect. d. If an increase in health care expenditure today results in a more competitive health care market tomorrow, then health care expenditure has an investment effect.arrow_forwardI 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.arrow_forward
- 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.arrow_forwardOne 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.arrow_forwardIndicate whether the statement is true or false, and justify your answer.While obesity generally results in higher per-year medical costs, obese individuals do not typically have higher average lifetime medical costs than non-obese individuals because they do not live as long.arrow_forward
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