Analytical problems12 Faustian health economics. Consider Figure 11.10, which shows the locus of feasiblecontracts for the population of the nation of Pcoria.Figure 11.10. The locus of amosed wifeasible contracts with moralhazard.tvell alordhalf fullfullFullnessIn which corner of this diagram (northeast, southeast, northwest, or southwest) isutility highest for consumers? What prevents insurance companies from offeringacontracts in this corner?b On your own version of Figure 11.10, plot new points to represent where themarket would be under (i) a nationally mandated full insurance policy and (ii) aninsurance ban.c Would a nationally mandated full insurance policy be optimal for Pcoria? Whatabout an insurance ban?d Suppose the devil approaches the newly elected President of Pcoria with anunusual bargain. He offers to magically eliminate moral hazard, but in return Pco-ria must forbid contracts that are more than half full. On a new version of tihoPremium Anoowlod figure, draw a new locus of the contracts that would be feasible if the Presidenttakes the devil's bargain.Should the President take the devil's bargain? Why or why not?f The indifference curves in Figure 11.10 represent one possible set of preferencesfor Pcorian society. On a new figure, draw an alternative set of indifference curvessuch that the bargain is a good deal relative to the status quo.orlodeblano g Which type of society is more likely to accept the devil's bargain: one that is rel-onmab nel atively risk-neutral or one that is relatively risk-averse? Explain why your answermakes intuitive sense.•1

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Analytical problems 12 Faustian health economics. Consider Figure 11.10, which shows the locus of feasible contracts for the population of the nation of Pcoria. a Figure 11.10. The locus of feasible contracts with moral hazard. half full full Fullness In which corner of this diagram (northeast, southeast, northwest, or southwest) is utility highest for consumers? What prevents insurance companies from offering contracts in this corner? b On your own version of Figure 11.10, plot new points to represent where the market would be under (i) a nationally mandated full insurance policy and (ii) an insurance ban. c Would a nationally mandated full insurance policy be optimal for Pcoria? What about an insurance ban? Premium

Analytical problems 12 Faustian health economics. Consider Figure 11.10, which shows the locus of feasible contracts for the population of the nation of Pcoria. a Figure 11.10. The locus of feasible contracts with moral hazard. half full full Fullness In which corner of this diagram (northeast, southeast, northwest, or southwest) is utility highest for consumers? What prevents insurance companies from offering contracts in this corner? b On your own version of Figure 11.10, plot new points to represent where the market would be under (i) a nationally mandated full insurance policy and (ii) an insurance ban. c Would a nationally mandated full insurance policy be optimal for Pcoria? What about an insurance ban? Premium

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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