Suppose that an individual's demand curve for doc- tor visits per year is given by the equation P = 100 - 25Q, where Q is the number of doctor visits per year and P is the price per visit. Suppose also that the marginal cost of each doctor visit is $50. a. How many visits per year would be efficient? What is the total cost of the efficient number of visits? b. Suppose that the individual obtains insur- ance. There is no deductible, and the coin- surance rate is 50 percent. How many visits to the doctor will occur now? What are the individual's out-of-pocket costs? How much does the insurance company pay for this in dividual's doctors' visits? c. What is the deadweight loss (if any) caused by this insurance policy?
/Suppose that an individual's
tor visits per year is given by the equation P = 100
- 25Q, where Q is the number of doctor visits per
year and P is the
the marginal cost of each doctor visit is $50.
a. How many visits per year would be efficient?
What is the total cost of the efficient number
of visits?
b. Suppose that the individual obtains insur-
ance. There is no deductible, and the coin-
surance rate is 50 percent. How many visits
to the doctor will occur now? What are the
individual's out-of-pocket costs? How much
does the insurance company pay for this in
dividual's doctors' visits?
c. What is the
by this insurance policy?
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
