Suppose that an individual's demand curve for doc- tor visits per year is given by the equation P = 500 - 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 $100. 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 demand curve for doc-
tor visits per year is given by the equation P = 500
- 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 $100.
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?
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