Suppose the price of a unit of medical care is.docx

# Suppose the price of a unit of medical care is.docx - 1...

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1. Suppose the price of a unit of medical care is \$100 and the person's insurance policy covers up to \$100,000 in expenditures incurred on behalf of the insured individual per year. Show graphically how the maximum payment limit affects the quantity demanded. Assume a zero co- pay to the limit. 2. Bills new insurance policy contains a prescription plan that provides all drugs through a local pharmacy with a \$2 co-payment. Under the old insurance plan, Bill had to for his own medication and purchased nine inhalers at \$17 a piece to help control his asthma. With the new plan, Bill purchases fifteen inhalers, keeping some of the spares in his glove compartment and desk, since he only has to pay a \$2 co-payment for each one. How much are the six additional inhalers worth to Bill? How much do they cost him? How much do they cost the insurance company? Is Bill better off or worse off under the new plan? 3. Suppose a hospital has 500 beds. It faces a demand curve X = 1200 – 2p, where p is the price of the bed day and X is the number of patient days of care demanded. The fixed cost of adding a new bed is
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• Winter '17

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