EBK HEALTH ECONOMICS
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ISBN: 9781137029973
Author: TU
Publisher: YUZU
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Question
Chapter 7, Problem 13AP
(a)
To determine
Describe the algebraic expression for both
(b)
To determine
Determine an individual utility curve.
(c)
To determine
Describe an algebraic expression for M.
(d)
To determine
Derive the coordinate plane with p on x axis and M on Y axis.
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Suppose, if ill, that Fred’s demand for health services is summarized by the demand curve Q = 50 − 2P , where P is the price of services. How many services does he buy at a price of $20? Suppose that Fred’s probability of illness is 0.25. What is the actuarially fair price of health insurance for Fred with a zero coinsurance rate? If the insurance company pays Fred’s entire loss, will the insurance company offer him insurance at the actuarially fair rate? Why?
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Let W represents an individual’s annual earned income and U(W) = (W/10)0.5 is this individual’s von Neumann-Morgenstern utility index (or utility function) . This individual earned income is $49,000. This individual faces the prospect of a 20% chance of needing health care, with a price tag of $13,000. Assume this person is risk averse. Also assume that the insurance company has only claim costs and that administrative costs are $0. The maximum health insurance premium this individual is willing to pay is??
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