John is planning to travel to a country where there is some risk of contracting yellow fever.  The direct market price for the medication that prevents yellow fever is $125.  It would take him 2 hours to visit his doctor and get the prescription filled.  The opportunity cost of his time is $25/hour. If he contracts yellow fever we assume that he will be sick and not able to work full days for two weeks.  Under these conditions, let's assume he can work half days and has no vacation or sick time to use.  His company will not pay him when he is sick and not working.  His out of pocket expenses for medication, doctors’ visits, and lab tests to treat the yellow fever will be $500.  His normal salary is $1,000 per week.    John believes that his chance of getting yellow fever without preventative medicine is about 20%.  His chance of getting yellow fever with the medication is 0%. There is no pain and suffering to be considered in this problem.  What is the maximum price that John would pay for the medication if he has no insurance?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question

John is planning to travel to a country where there is some risk of contracting yellow fever.  The direct market price for the medication that prevents yellow fever is $125.  It would take him 2 hours to visit his doctor and get the prescription filled.  The opportunity cost of his time is $25/hour.

If he contracts yellow fever we assume that he will be sick and not able to work full days for two weeks.  Under these conditions, let's assume he can work half days and has no vacation or sick time to use.  His company will not pay him when he is sick and not working.  His out of pocket expenses for medication, doctors’ visits, and lab tests to treat the yellow fever will be $500.  His normal salary is $1,000 per week.   

John believes that his chance of getting yellow fever without preventative medicine is about 20%.  His chance of getting yellow fever with the medication is 0%.

There is no pain and suffering to be considered in this problem. 

What is the maximum price that John would pay for the medication if he has no insurance? 

 

Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps

Blurred answer
Knowledge Booster
Product life cycle
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education