In the production possibilities frontier (Figure 1- Z on the vertical axis, H on the horizontal axis) shown below, for a rational individual who cares only about health ("H"), they will choose to produce the level of home goods and health associated with B H

In the production possibilities frontier (Figure 1- Z on the vertical axis, H on the horizontal axis) shown below, for a rational individual who cares only about health ("H"), they will choose to produce the level of home goods and health associated with B H

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose that you have data at the individual level that includes information on the price of a doctor visit an individual and the number of doctor visits they go to in a given year. For simplicity, let's say that those with more generous plans pay less for a doctor's visit, while those with less generous plans pay more for a visit. You graph the relationship between the price individual pays for doctor visits against the number of visits, and you see a downward sloping line; let's call this "measured demand." The problem of "endogeneity" discussed this week could arise here if individuals who know they go to the doctor frequently buy_ generous coverage while those who know they rarely go to the generous coverage. This would imply that the "measured" demand curve is doctor purchase. more elastic than the "true" demand curve. more; less more; more less; less less; more
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