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Unformatted text preview: pocket? How much does the insurance company pay? E. Does insurance lead to an efficient consumption of medical services? Briefly explain. F. Show the area of deadweight loss and determine its dollar value. Answers: A. Set P=MC; Q=20 units; P=$150. B. Total expenditures will be $3,000. C. Set .30P=MC; Q=62 units; P=MC of firm=$150 but Price paid by patient is $45 D. Total expenditure is $9300; insurance pays $6510; patient pays $2790; E. Insurance leads to overconsumption (MB at 62 units is $45 but the MC is $150) creating a deadweight loss. F. Area is triangle between two quantities, above demand and is valued at $2205....
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This note was uploaded on 12/10/2010 for the course ECONOMICS 432 taught by Professor Jannett during the Spring '10 term at Brown.
- Spring '10