In this example, imagine 4 consumers who are identical in every way with the exception that they have different insurance plans. Assumption: For this question, ignore the cost of producing a visit. Assume physician is trying to maximize revenue. Furthermore, assume that a visit is indivisible and if a person is indifferent, she chooses to make the visit. Here are each of their prices schedules for physician services: A : flat $80/visit B : flat $70/visit C : flat $70/visit + $10/year membership fee. D : Variable schedule: $140/visit for first 1 visit • $100/visit for next 2 visits $80/visit for next 2 visits

In this example, imagine 4 consumers who are identical in every way with the exception that they have different insurance plans. Assumption: For this question, ignore the cost of producing a visit. Assume physician is trying to maximize revenue. Furthermore, assume that a visit is indivisible and if a person is indifferent, she chooses to make the visit. Here are each of their prices schedules for physician services: A : flat $80/visit B : flat $70/visit C : flat $70/visit + $10/year membership fee. D : Variable schedule: $140/visit for first 1 visit • $100/visit for next 2 visits $80/visit for next 2 visits

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Applicatio
In this example, imagine 4 consumers who are identical in every way
with the exception that they have different insurance plans. Assumption:
For this question, ignore the cost of producing a visit. Assume physician
is trying to maximize revenue. Furthermore, assume that a visit is
indivisible and if a person is indifferent, she chooses to make the visit.
Here are each of their prices schedules for physician services:
A : flat $80/visit
B : flat $70/visit
C : flat $70/visit + $10/year membership fee.
D : Variable schedule:
$140/visit for first 1 visit
$100/visit for next 2 visits
$80/visit for next 2 visits
$60/visit for visits over 5
Each consumer has direct and inverse demand schedules:
Q = 16–0.1P
p= 160– 10Q
Calculate the number of visits, the consumer surplus, and the firm
revenue for each person.

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