Reference no: EM132502934
An individual's demand for physician office visits in a given year is given by, Q = 14 - 0.075P, where Q is the number of office visits and P is the out-of-pocket price paid by the individual for each visit. Assume the market price of an office visit is $150. Use this information to answer the questions below.
1. Without insurance, how many office visits would the individual make in one year?
NOTE: Enter a formula to calculate the number of visits, rounding your answer to the nearest whole number.
2. Suppose the individual does have insurance and pays only a $40 copayment for each visit. How many office visits will the individual make in one year?
NOTE: Again, enter a formula, rounding your answer to the nearest whole number.
3. What is the moral hazard and deadweight loss (DWL) associated with this individual having insurance? NOTE: Enter formulas in the respective boxes below.
Moral Hazard:
Deadweight loss (DWL):
4. Enter a formula to calculate the proportion of total expenditure on office visits (for this individual with insurance) that is deadweight loss.