Assume that health insurance is private in a country, and the market for insurance iscompetitive. The figure below shows the marginal benefit and willingness and abilityto pay curve.Premium (thousands of dollars per year)$160 billion.$80 billion.$160 million.$80 million.O006ND = MB1020 30 40 50Quantity (millions of families insured)Suppose that the marginal social benefit of insurance exceeds the willingness andability to pay by a constant $2,000 per family per year. Suppose the marginal cost ofhealth insurance is a constant $8,000 a year. If the government decides to providepublic health insurance, how much will taxpayers have to pay?

Answered: Assume that health insurance is private…

Assume that health insurance is private in a country, and the market for insurance is competitive. The figure below shows the marginal benefit and willingness and ability to pay curve.

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

Assume that health insurance is private in a country, and the market for insurance is
competitive. The figure below shows the marginal benefit and willingness and ability
to pay curve.
Premium (thousands of dollars per year)
$160 billion.
$80 billion.
$160 million.
$80 million.
O
00
6
N
D = MB
10
20 30 40 50
Quantity (millions of families insured)
Suppose that the marginal social benefit of insurance exceeds the willingness and
ability to pay by a constant $2,000 per family per year. Suppose the marginal cost of
health insurance is a constant $8,000 a year. If the government decides to provide
public health insurance, how much will taxpayers have to pay?

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