Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Microeconomics Expert

Each individual faces a 10% chance of contracting muscular back pain. Assume that back pain can only be treated by aggressive physical therapy. Physical therapists will provide as many visits as demanded for $120 per visit.

(a) Once an individual is diagnosed with the problem, his demand curve for back pain treatment (physical therapy session) is represented by the following formula:
Q = 40 - ¼ * P

where P is the price of an office visit and Q is the quantity of office visits
demanded. Draw the demand and supply curves for back pain treatment. Clearly
label your axis. What is the equilibrium quantity and price of physical therapy visits? How much will he/she spend on treatment for back pain?

(b) Now assume that individuals can buy an insurance policy at the beginning of the year before they know whether they will have muscular back pain. The insurer will pay for physical therapy sessions (without copayments or deductibles) for people who are diagnosed with the problem. How many physical therapy visits will the insured people have when they have back pain? How much will the insurance company have to pay for each person with back pain?

(c) What is the dead weight loss associated with full health insurance? Show it on your graph in part (a).

(d) Assume economy of risk-averse individuals with demand functions similar to the one described in part

(a). Will insurance, which provides full coverage, arise in this market? describe your answer (if yes, then quote the actuarially fair premium; if not, describe why not)

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M939647

Have any Question? 


Related Questions in Microeconomics

E8-9 periodic versus perpetual entries fong sai-yuk company

E8-9 (Periodic versus Perpetual Entries) Fong Sai-Yuk Company sells one product. Presented below is information for January for Fong Sai-Yuk Company. Jan 1 Inventory 100 units at $5.00  each Jan 4 Sale 80 units at $8.00  ...

Question 1which of the following levels of supply chain

Question 1 Which of the following levels of supply chain information systems is most likely to provide the firm with a competitive advantage? A.Strategic planning B.Decision analysis C.Management control D.Transaction sy ...

Fiscal policy modulewhich has a larger effect on aggregate

Fiscal Policy Module Which has a larger effect on aggregate demand: an increase in government expenditure or an equal-sized decrease in taxes? Explain your answer. To eliminate a recessionary gap, which fiscal policy sho ...

Milestone projectmilestone one propose organization for

Milestone Project Milestone One: Propose Organization for Analysis In Module Three, you will select the organization you would like to analyze in part two of the final project using the U.S. Securities and Exchange Commi ...

Assignment multiyear plans and Assignment: Multiyear Plans and Analysis Preparation •

Assignment: Multiyear Plans and Analysis Preparation • Review the document titled "City of Charlottesville 2010 Annual Comprehensive Plan" located in the course shell. Write a three to four (3-4) page paper in which you: ...

Assignmentyou have been asked to assist your organizations

Assignment You have been asked to assist your organization's marketing department to better understand how consumers make economic decisions. Write a 1,050-word analysis that includes the following: • The impact the theo ...

Project-listen to this video asafter you work on your graph

Project- Listen to this video as/after you work on your graph. The lecture is on the 'Aftermath of the Financial Crisis' given by Ben Bernanke in March 29 th 2012. https://www.c-span.org/video/?305198-1/ben-bernanke-lect ...

Problem setthis problem set is due on monday october 24th

Problem Set This problem set is due on Monday, October 24th in class. Consider the specific factors model (2 goods, 3 factors, where labor is the flexible factor) for a given small country with the following Cobb-Douglas ...

Assignment money and pricethe organizations strategic plan

Assignment: Money and Price The organization's strategic plan you wrote about calls for an aggressive growth plan, requiring investment in facilities and equipment, growth in productivity, and labor over the next five ye ...

Leasing equipmentfor catherine owens onlybullsuggest one

Leasing Equipment For Catherine Owens Only • Suggest one key economic factor that motivates leasing as an option in acquiring an asset. Explain the potential asymmetries that may exist where leasing may be beneficial to ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro

Describe what you learned about the impact of economic

Describe what you learned about the impact of economic, social, and demographic trends affecting the US labor environmen