Reference no: EM13862658
Assume that only one health condition ever afflicts people for which one treatment is available, costing $100,000. The condition is very bad, so all consumers would be willing to pay for the treatment even if they did not have insurance. Consumers differ in their risk of being afflicted by the condition. Specifically, “healthy types” have a 1% chance of being afflicted, while “sickies” have an 11% probability, with an equal number of each type in the population.
For each of the following scenarios, calculate the premium (or premiums) for full insurance you would expect in a competitive market, and explain which consumers would be expected to purchase full insurance. Assume all consumers are risk-averse and only full insurance policies are available. Assume also that everyone (consumers and insurers) know the information above.
Scenario 1: Neither consumers nor insurers know anybody’s risk type.
Scenario 2: Consumers all know their own risk type, but insurers do not know the risk type of individual consumers.
Scenario 3: All consumers and insurers know everyone’s risk type.
Scenario 4: Same as Scenario 3, except “community rating” laws prevent insurers from charging different premiums to different consumers, and “guaranteed issues” laws prevent insurers from denying coverage to anyone. (I.e. full insurance must be offered to everyone at the same premium, regardless of their risk type.)
Scenario 5: Same as Scenario 4, but consumers are legally required to purchase full insurance.
Which scenarios lead to efficient outcomes in the insurance market? Why might someone prefer one efficient outcome over another?
|
Trevor consumes two goods-total change in quantity demanded
: Trevor consumes two goods: fruit (good x) and vegetables (good y). His demand for fruit is given by x(px,m)=.04m-4.24px. His income is $322, the price of fruit is $2, the price of vegetables is $1. If the price of vegetables rises to $3, calculate to..
|
|
Demand function for oysters given by the equation
: Terry has a demand function for oysters given by the equation q=.02m-2p, where m is income and p is price. Terry's income is $8,000 and he initially has to pay a price of $40 per oyster. Assume the price of oysters rises to $80. Calculate the substit..
|
|
Operates to affect relative price of more complete coverage
: Jim currently pays premium $P for his health insurance, which he purchases in a competitive health insurance market, and covers 80% of all his healthcare costs (i.e. 20% coinsurance rate; no deductible or catastrophic cap). If he were to instead purc..
|
|
Business systems plan-strategic information systems
: Based on the information contained in the Business Systems Plan and the Strategic Information Systems Assessment, write an IT strategy statement that details the following:
|
|
Lead to efficient outcomes in insurance market
: Assume that only one health condition ever afflicts people for which one treatment is available, costing $100,000. The condition is very bad, so all consumers would be willing to pay for the treatment even if they did not have insurance. Consumers al..
|
|
What are some of the worst jobs you know about
: What are some of the worst jobs you know about? Why are they bad jobs? Why do some people want these jobs
|
|
What effect does the tax on a good have on buyers and seller
: What effect does the tax on a good have on buyers and sellers of the good?
|
|
Calculate a production budget for january and february
: Calculate A production budget for January and February, A purchases budget in units for January and A manufacturing cost budget for January.
|
|
Calculating the afps for different insurance policies
: The following question provides some practice calculating the AFPs for different insurance policies. If the individual remains healthy (80% probability), she will consume $500 in medical care in the upcoming year.
|