Part -1:

1. After a period of intense lobbying by the plastic surgery advocates, assume that the government allows insurance policies to cover plastic surgeries at 75% per procedure (so the coinsurance rate is 0.25). Redraw the graph from part a. above and add the effective demand curve now that everyone has insurance. What is the new equilibrium price and quantity?

2 How does the co-insurance policy affect the quantity of doctor visits consumed? Calculate the deadweight loss associated with the existence of insurance.

3. True or false. If the increase in consumer and producer surplus from having insurance is greater than the dead-weight loss that results from the market after insurance is bought, then insurance increased economic well-being despite the dead-weight loss.

Explain your reasoning.

Part - 2:

a. Weisbrod speaks about the interdependent relationship between the development of health care technology and the provision of health insurance.

Explain Weisbrod's distinction between "halfway technologies" and "high technologies" and how the provision of insurance might favor the research and development of one over the other.

b. Ken Arrow lists 4 aspects of the expected behavior of physicians as suppliers of medical that differ from traditional suppliers in an economic sense.

List 3 of the 4 conditions and cite an example for each from other materials covered in class that demonstrate these conditions (i.e. John Oliver, The 60 Minutes segment, Gawande, Fatjon's interview, Emelie's interview, etc.).

c. Briefly describe the traditional correlation between health investment and education attainment.

d. Explain the Law of Large Numbers and briefly describe why this statistical idea is so important to the provision of market-based health insurance.