What is optimal quantity for this patient to consume

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Suppose that there's only one type of medical care ( office visits ) and that each visit costs $20. Consider now an insurance policy with a $100 deductible that pays for 80 percent of the consumer's medical costs after that. The price schedule confronting that consumer has a step in it at a quantity (five visits) such that total spending (price x quantity) equals the amount of the deductible($100). Draw such a price schedule. Now draw a consumer's demand curve that intersects the price schedule at two visits (on the top step), at five visits (somewhere in the vertical portion of the price schedule), and at seven visits (on the lower step). Question: What is the optimal quantity for this patient to consume: two visits, give visits, or seven visits? Why?

Reference no: EM131244807

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