Health Economics
14th Edition
ISBN: 9781137029966
Author: Jay Bhattacharya
Publisher: SPRINGER NATURE CUSTOMER SERVICE
expand_more
expand_more
format_list_bulleted
Question
Chapter 7, Problem 14AP
(a)
To determine
Describe whether the curve
(b)
To determine
Derive whether the
(c)
To determine
Explain under what condition an individual would likely buy the subsidized insurance.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Billy's income Is equal to / = 100 and his utility function is U = [?. There is a 10% chance that
he will be in an accident next year with his skateboard that will cause $70 worth of damage.
Get the risk premium for Billy.
b. An Insurance company offers a policy that will cover all the damages if an accident occurs
Calculate the fair price for the insurance.
%3D
a.
Whether a certain criterion is determinant or not is independent of the situation in which a product is consumed.
True
False
In the context of disposing of consumer refuse, recycling cuts down on garbage while providing raw materials for other new products.
True
False
Which of the following is a fundamental emotion evoked by positive, anticipatory appraisals that signal uncertainty about a positive outcome?
a.
Hope
b.
Confusion
c.
Surprise
d.
Pride
Which of the following best describes chronic, repetitive purchasing behaviors that are in response to negative events or feelings?
a.
Addictive consumption
b.
Impulsive purchasing
c.
Window shopping
d.
Compulsive buying
Retaliatory revenge is when a consumer yells insults and makes a public scene in an effort to harm the business.
True
False
Suppose Diane's utility function is U=-
Vincome . Diane earns an income of
$102,400, but there is a 15% chance that she will get sick and have a $62,400 medical bill.
The health insurance company, DenialCare, will offer her a health insurance policy to pay
for her medical bills. What would an actuarially fair premium be and what is the
maximum she would be willing to pay for the insurance?
Knowledge Booster
Similar questions
- Emily and Celeste both work at the same company and earn $10,000 per month. Assume all income is consumed (c). There is a 3% chance that Emily will lose her job and a 6% chance that Celeste will lose her job this month. If either loses her job, she earns $0. Celeste and Emily both have utility function c^1/2 Suppose the government offers partial insurance. The government now pays a benefit of $5000 in the event of job loss and charges a premium of $225. What is the expected cost to the government of this program? Round to two decimal places and do not enter a “$” sign.arrow_forwardSuppose your preferences can characterized by the simple utility function U = √C, where C is consumption. You enjoy rock climbing, where you have a 10% chance of get- ting injured and losing $50,000. Your income (and therefore consumption) in the uninjured state is $90,000. What is the most you are willing to pay for an insurance policy? What is the fee for a fair insurance?arrow_forward1 Consider an individual for whom utility is U = ln(I) There are two states of the world (G,B): Outcome G = 2000 with probability .4 Outcome B = 1000 with probability .6 W1 = 2000 L = 1000 π = .6 Option = invest $50 to lower π to .2 An insurance company is willing to offer a contract in which the individual pays a premium and gets full compensation for the loss (1000) in the bad state. a) With no insurance but the option of investing the $50, what is the utility of the individual? b) What is the first-best outcome for utility of the individual, insurance premium, and profits of the insurance company?arrow_forward
- 12. A consumer who conforms to the von Neumann-Morgenstern axioms is faced with four situations A, B, C, and D. She prefers A to B, B to C, and C to D. Experimentation reveals that the consumer is indifferent between B and a lottery ticket with probabilities of 0.4 and 0.6 for A and D respectively, and that she is indifferent between C and a lottery ticket with probabilities of 0.2 and 0.8 for B and D respectively. Construct a set of von Neumann- Morgenstern utility numbers for the four situations.arrow_forward#2. Hannah gets 50 utils from visiting her family for Thanksgiving. But there is a 1% chance that she will get the coronavirus from them. If she gets the coronavirus, her utility is -6000 utils. Her total utility would be -5950 (i.e. 50 – 6000). She gets 0 utils from staying healthy (total utility = 50 + 0 = 50). What is her expected utility? a. 50 utils b. -6 utils c. -10 utils d. -5999.5 utils e. -6000 utils f. None of these #3. Hannah gets 50 utils from visiting her family for Thanksgiving. But there is a 1% chance that she will get the coronavirus from them. If she gets the coronavirus, her utility is -6000 utils. Her total utility would be -5950 (i.e. 50 – 6000). She gets 0 utils from staying healthy (total utility = 50 + 0 = 50). If Hannah doesn't visit her family for Thanksgiving, then she gets -25 utils from eating turkey cold cuts alone in front of the TV. In that case, there is no risk of getting sick. What will Hannah do? a. Visit her family for Thanksgiving b. Not visit her…arrow_forwardWho is most risk-averse? a-an individual with slightly diminishing marginal utility. b-all individuals are equally risk-averse. c-an individual with rapidly diminishing marginal utility. d-an individual who does not experience diminishing marginal utility.arrow_forward
- QUESTION 5 A consumer has utility u (I) = √I and income $1,600. The cost of going to the doctor is $1,150, and the cost of going to the gym is $150. If the consumer goes to the gym, the probability of getting sick is 20%; if she does not go to the gym, the probability of getting sick is 80%. When sick, the consumer must go to the doctor. An insurance company is offering a health insurance plan with an insurance premium of $230 and a co-pay of $110 (that is, the consumer must pay the $110 if she goes to the doctor). a) The consumer's expected utility from purchasing this insurance and going to the gym is b) The consumer's expected utility from purchasing this insurance and not going to the gym is c) In this market, the $110 copay ✓ QUESTION 6 A salesperson is trying to sell ca Given her effort e, with probabili The dealership pays her a bonu a) Given the bonus b, the salesp b) Suppose the dealership pays *Select Answer* 34.6061 35.7999 37.0135 43.0338 42.4303 46.2601 fixes the adverse…arrow_forwardPeter has an endowment of 3 units of good x and 5 units of good y. He can buy and sell x at a price of 100 and y at the price of 200. He receives an income of $700 as alimony from a former spouse. a) Draw Peter’s budget line for x and y. Show his initial endowment of x and y on your diagram. b) Calculate the amount of x that he could afford if he bought only x and the amount of y he could afford if he bought only y. c) Write an equation for Peter’s budget.arrow_forwardAnita bought a new scooter for $500. She is deciding whether she should insureher scooter against theft. She has recently read in the news that one out of 10 scooters arestolen in her town. She can buy scooter theft insurance at the price of 12 cents per $1 ofinsurance. How much insurance will Anita buy if her utility function is U(C) = 2C + 100?arrow_forward
- 2) Explain how utility could be used in a decision where performance is not measuredby monetary value.arrow_forwardTess and Lex earn $40,000 per year and all earnings are spent on consumption (c). Tess and Lex both have the utility function c. Both could experience an adverse event that results in earnings of $0 per year. Tess has a 1% chance of experiencing an adverse event and Lex has a 12% chance of experiencing an adverse event. Tess and Lex are both aware of their risk of an adverse event. 1. Suppose the actuarially fair premium charge is 2600, Calculate Tess’ expected utility with full insurance if she is charged the premium. Round to two decimal places. 2. What is the premium that private insurance companies will charge for full insurance? Round to two decimal places. 3.Assume the social welfare function is the sum of the Tess’ and Lex’s utility functions. Select the correct statement regarding the explanation for what has happened in the private market and the role of social insurance. a.Adverse section has lead to market failure. The government could improve social welfare by…arrow_forwardSuppose that 20 risk neutral competitors participate in a rent seeking game with a fixed prize of $500. Each player may invest as much money as he wishes in the political contest. The probability of winning is directly proportional to the candidate's share of the total rent-seeking investment. 1. What is the expected net benefit of a player if all other players invest $20 each? Write the net benefit as a function of the player's investment. 2. Solve the maximization problem to arrive at the profit-maximizing investment. Round to the nearest cent.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
