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Health Insurance Class at UCLA
Exp (Loss) = PL (cost) + PR (0)
Please keep Mary' Johnsons income in mind when answering this question.
Mary Johnson from the city, a 49-year-old woman with an annual income of $60k is trying to decide whether to purchase health insurance on the marketplace. The premium for people in her age group is $3,500. She has a 2 Percent (2%) chance of having a condition that will cost her $55k.
Her utility function is: logY.
1. Will Mary Johnson purchase the insurance policy - why or why not so?
2. She is potentially eligible for a subsidy. How much would the U.S government must subsidize the premium for Mary Johnson to purchase the health insurance?
3. Suppose that Mary would have to pay a tax of $1k if she remained uninsured. Would she pay the tax or purchase the health insurance?
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Explain how Economic Base Theory and the New Growth Theory differ in their answers to that question.
Please try to come up with real examples: it's not enough to say which savings account decreased.
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