Ask Question, Ask an Expert


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

Assignmentbulllaw of bailment1borrow your friends car and

Assignment • Law of bailment. 1.Borrow your friend's car and scratch the car against the wall. What's your duty that you must be responsible for? 2. If you rented from car rental agency, what would be your duty and where ...

Assignmentyou have been offered a paralegal position with a

Assignment You have been offered a paralegal position with a firm in Raleigh, NC. A local winemaker has contacted your firm for legal assistance. No one in the firm knows anything about this subject but would like to exp ...

Assignmentquestion 1 how is a project baseline used to

Assignment Question 1) How is a project baseline used to guide the execution of the project's work, to evaluate progress and performance, and to control the project? Also, as you continue to think about monitoring and co ...

1 mary has two possible career paths she can become either

1. Mary has two possible career paths. She can become either a biologist or a concert pianist. Mary lives for 2 periods. In the first period she gets the appropriate education for her career. In the second period, she wo ...

Tyler poland is a stock picker responsible for recommending

Tyler Poland is a stock picker responsible for recommending Mexican securities for his brokerage firm's clients. He is often frustrated about the lack of credible information on companies in Mexico. "Everything is always ...

Microeconomichow would a low-cost price leader enforce its

Microeconomic How would a low-cost price leader enforce its leadership through implied threats to a rival? How does a firm become a "low cost" price leader? Discuss the specific type of market structure that implied thre ...

Assignmentthis final project paper will utilize many of the

Assignment This final project paper will utilize many of the sections of material you have studied during the duration of this course. You will make use of your own personal observations and occupational experiences to e ...

Assignmentthere are many terms used to describe the

Assignment There are many terms used to describe the importance of people to an organization's success. Some of those terms are human resources, human capital, intellectual assets, and talent management. This implies tha ...

Assignmentconcepts you should knowa knowledge economyb

Assignment Concepts you should know: a. Knowledge economy b. Learning organisations c. Explicit and tacit knowledge d. Single-loop versus double-loop learning e. Pragmatism Discussion Questions: a. "Organization charts a ...

Assignment current economics analysisthere are two internet

Assignment: Current Economics Analysis There are two Internet Questions included with this assignment. Problem 1 Could we ever achieve an unemployment rate below "full" employment? What problems might we encounter if it ...

  • 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

A cola-dispensing machine is set to dispense 9 ounces of

A cola-dispensing machine is set to dispense 9 ounces of cola per cup, with a standard deviation of 1.0 ounce. The manuf

What is marketingbullwhat is marketing think back to your

What is Marketing? • "What is marketing"? Think back to your impressions before you started this class versus how you

Question -your client david smith runs a small it

QUESTION - Your client, David Smith runs a small IT consulting business specialising in computer software and techno

Inspection of a random sample of 22 aircraft showed that 15

Inspection of a random sample of 22 aircraft showed that 15 needed repairs to fix a wiring problem that might compromise

Effective hrmquestionhow can an effective hrm system help

Effective HRM Question How can an effective HRM system help facilitate the achievement of an organization's strate