Microeconomics
Microeconomics
11th Edition
ISBN: 9781260507140
Author: David C. Colander
Publisher: McGraw Hill Education
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Chapter 22, Problem 13QE
To determine

Explain the given statement.   

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A recent trend in health insurance is the Health Savings Account (HSA). The idea behind Health Savings Accounts is that rather than providing employees with health insurance that makes visiting doctors cost little more than a simple $10 or $20 copay the employer gives the employee money to use to spend on health care, but the employee bares the entire cost of seeing the doctor. What money given for health care not spent by the employee can be withdrawn by the employee as if it was additional income. It is believed that Health Savings Accounts will reduce the total amount of money spent on seeing doctors. Using Supply and Demand analysis, explain why there is the expectation that HSA’s will reduce spending on doctors.
Rosa received a corgi pillow as a raffle prize; she would have been willing to pay $18 to buy it herself. Based on the endowment effect, we would expect Rosa to be willing to sell the pillow.
As an investment advisor, you tell a client that an investment in a mutual fund has (over the next year) a higher expected return than an investment in the money market. The client then asks the following questions: a. Does that imply that the mutual fund will certainly yield a higher return than the money market? b. Does it follow that I should invest in the mutual fund rather than in the money market? How would you reply?
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