Essentials of Economics (MindTap Course List)
8th Edition
ISBN: 9781337091992
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Question
Chapter 7, Problem 11PA
Subpart (a):
To determine
The
Subpart (b):
To determine
The demand and supply of medical care.
Subpart (c):
To determine
The demand and supply of medical care.
Subpart (d):
To determine
The demand and supply of medical care.
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Students have asked these similar questions
1.
An article in the Economist observes: "Insurance companies often suspect
the only people who buy insurance are the ones most likely to collect."
What do economists call the problem that is described in the article? If insurance
companies are correct in their suspicion, what are the consequences for the market for
insurance? Use health insurance as an example.
Ralph will consume any health care service just as long as its MB exceeds the money he must pay out of pocket. His insurance policy has a zero deductible and a 10 percent copay, so Ralph only has to pay 10 percent of the price charged for any medical procedure. Which of the following procedures will Ralph choose to consume?
a. An $800 eye exam that has an MB of $100 to Ralph.
b. A $90 hearing test that has an MB of $5 to Ralph.
c. A $35,000 knee surgery that has an MB of $3,000 to Ralph.
d. A $10,000 baldness treatment that has an MB of $16,000 to Ralph.
Consider the following information on Alfred’s demand for visits per year to his health clinic, if his health insurance does not cover (100 percent coinsurance) clinic visits.
Price Quantity
5 9
10 9
15 9
20 8
25 7
30 6
35 5
40 4
a. Alfred has been paying $25 per visit. How many visits does he make per year? Find his demand curve.
b. What happens to his demand curve if the insurance company institutes a 40 percent coinsurance feature (Alfred pays 40 percent of the price of each visit)? What is his new equilibrium quantity?
Note:-
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Chapter 7 Solutions
Essentials of Economics (MindTap Course List)
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- 10:26 A Homework IV.pdf 3. If substitution effect is greater than income effect, would physicians spend more time with existing patients or would they switch the more lucrative patients. Explain. 4. What is value-based- purchasing, was it successful for reducing unnecessary utilization. 5. According to economists, competitive market provides best outcome for consumer, lowest possible price with highest possible quantity. Why would this not work with health care market, and concentration of hospitals might be good idea? 6. Give examples of horizontal and vertical integrations in health care systems? 7. If the concentration of hospitals and insurance companies might be necessary, why do we need Department of Justice or Federal Trade Commission to investigate the merger and acquisitions? 8. From the following graph, show the equilibriums under each scenario. Market is in equilibrium at A under competitive market. (a) Show the equilibrium under monopoly. Call this point B (b) When the…arrow_forwardWhat are the equilibrium price and quantity of medical checkup?arrow_forward3rd party payments often cause the cost of health care to go down does third party payments to cover medical costs bring the price of medical services up?arrow_forward
- What is the relationship between health and health economics?arrow_forward2. In the following graph, suppose market is in equilibrium at point A. Determine if you agree or disagree with the statements. a. Suppose there is an increasing in demand for health care services but no changes in supply, then the new equilibrium will be at point C. b. From equilibrium point A, if there exist an increase in supply of the doctors in the area, the new equilibrium would be at point B. c. From equilibrium point A, if there is an induced demand from the increased number of doctors in the area, the new equilibrium would be at point C. d. If the demand curve is D', one can not say that there is an induced demand with the increase of physicians in the area. Q₂ Q₁ Quantity of Services Delivered Price per Unit Outputarrow_forwardWhat would happen if, in order to provide lower cost health care, the government decided to set a price ceiling (Pmax) in the health insurance market? (Please answer questions a, b, and c below.) What is the effect of this maximum price legislation on the market for health insurance? Briefly explain the situation for both consumers and producers (i.e. health care providers). What might the government do to achieve their intended aims (i.e. lower costs and increased quantity)?arrow_forward
- 6. The demand for the doctor's visits, Q, is the following: Q= 5 – 0.04P. The market price of a visit, equals the MC of $100. What is the equilibrium number of visits? What if the consumer purchases full-coverage (no coinsurance) health insurance and the demand stays the same. How many doctor visits would the patient consume? Calculate the deadweight loss or moral hazard cost as a result of the insurance coverage. Remember, DWL is there if units for which MB>MC are not produced, or if units for which MC>MB are produced.arrow_forwardEconomists in Champaign have been studying the local market for pizza. The market is described in the graph: Market for Pizza 10.3 10 9. 8 7 6.1 6 5.7 5 4.65 4.1 3.1 2.8 2.8 2.4 2.1 (2.1] 2 500 518 464 479 Quantity 401 430 545 577 Some research by the local university shows that eating pizza improves health in several ways. The local government decides to subsidize pizza consumption by paying $1.6 of every pizza sold(essentially a negative tax of $1.6). How much will the government spend with the subsidy? Pricearrow_forwardThe 2010 health reform law fails to provide universal health insurance coverage. T or F?arrow_forward
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