Exam 9: The Health Care Market

We have read in this chapter that people with insurance may be more likely to engage in risky behavior because they are insured.Does it make sense then that there should be an "insurance tax" on people that engage in these types of activities?

Pooling individuals allow insurance companies to _______ risk from a societal point of view.

Marginal benefit and marginal cost must _______ to avoid a deadweight loss.

The current percentage of Americans over the age of 65 is

The U.S.is the leader in health care.

Paying money in order to guarantee a certain level of compensation should an adverse event occur is

In Table 9.2 below,Emily will lose no income if she becomes sick.

One reason for the recent increases in health care costs is the aging of the American population.

What percentage of African Americans are uninsured?

In 2013,the percentage of health care expenditures paid out-of-pocket was

Suppose that the demand for medical services can be characterized by the equation X = 500 - P/3.Suppose further that the supply of health services can be characterized by the equation X = P - 100. (a)What is the equilibrium quantity and price in the market for health services? (b)In an effort to make health services more affordable,the government restricts the price of health services to be no greater than $250.What will happen to the quantity of health services in the market?

People will take better care of their health if there is more health care available.

When the average buyer of an insurance policy is likely to have higher risk than others in his class,this is known as

Expected values

In the figure below,the value of insurance is $7,000.

Suppose that the demand curve D_m for medical services can be characterized by the equation M = 2000 - P,where M is the amount of medical services received per year and P is the price.Suppose further that P₀ is constant at 800. (a)Find the equilibrium quantity of services at P₀. (b)Find the equilibrium quantity of services when there is only a co-payment of 20% required such that the price is 0.2P₀. (c)How much additional expenditures induced by insurance are created?

Suppose there are two drivers,Jermaine and Janet.Jermaine is not a very safe driver.In fact,there is a 7.5% chance that he will have an accident within the next year.Janet is a relatively safe driver.Her chances of having an accident in the next year are only 1%.If Jermaine is involved in an accident,he will cost the insurance company $1,000,000.If Janet is involved in an accident,she will only cost the company $500,000.What is the expected pay-out that the company can expect from insuring these two?

A third-party payment is

We have read that the uninsured and the insured behave differently in regard to medical services.Suppose that the insured have a demand curve that can be written as Q = 100 - P,where Q is the quantity of medical services and P is the price.Suppose further that the uninsured have a demand curve that can be written as Q = 100 - 2P. (a)At a price of $10 of medical services,how much will each demand? (b)At a quantity of 50 units,how much will the price be for the insured and uninsured?

Suppose that the quantity demanded of visits to a doctor per year is given by X = 12 - 0.05P,where X is the number of visits and P is the price the patient pays for a visit. (a)How many visits would the patient make if he or she had to pay the full price of a visit,$100? (b)How many visits would a patient make if he or she was insured and had to pay only a 15% co-insurance payment per visit? (c)How many visits would the patient make if medical services were free?