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Principles of Microeconomics 8th Edition

Principles of Microeconomics (8th Edition)

Book Edition8th Edition
Author(s)Mankiw
ISBN9781337096874
PublisherCengage Learning
SubjectEconomics
Section 7.1: Consumer Surplus
QuickQuiz
Section 7.2: Producer Surplus
QuickQuiz
Section 7.3: Market Efficiency
QuickQuiz
Chapter 7, End Of Chapter, Problems And Applications, Exercise 11
Page 152

Consider how health insurance affects the quantity of healthcare services performed. Suppose that the typical medical procedure has a cost of $100, yet a person with health insurance pays only $20 out of pocket. Her insurance company pays the remaining $80. (The insurance company recoups the $80 through premiums, but the premium a person pays does not depend on how many procedures that person chooses to undertake.)

 

a. Draw the demand curve in the market for medical care. (In your diagram, the horizontal axis should represent the number of medical procedures.) Show the quantity of procedures demanded if each procedure has a price of $100.

Consider how health insurance affects the quantity of healthcare services performed. Suppose that the typical medical procedure has a cost of $100, yet a person with health insurance pays only $20 out of pocket. Her insurance company pays the remaining $80. (The insurance company recoups the $80 through premiums, but the premium a person pays does not depend on how many procedures that person chooses to undertake.)

 

b. On your diagram, show the quantity of procedures demanded if consumers pay only $20 per procedure. If the cost of each procedure to society is truly $100, and if individuals have health insurance as described above, will the number of procedures performed maximize total surplus? Explain.

Consider how health insurance affects the quantity of healthcare services performed. Suppose that the typical medical procedure has a cost of $100, yet a person with health insurance pays only $20 out of pocket. Her insurance company pays the remaining $80. (The insurance company recoups the $80 through premiums, but the premium a person pays does not depend on how many procedures that person chooses to undertake.)

 

c. Economists often blame the health insurance system for excessive use of medical care. Given your analysis, why might the use of care be viewed as "excessive"?

Consider how health insurance affects the quantity of healthcare services performed. Suppose that the typical medical procedure has a cost of $100, yet a person with health insurance pays only $20 out of pocket. Her insurance company pays the remaining $80. (The insurance company recoups the $80 through premiums, but the premium a person pays does not depend on how many procedures that person chooses to undertake.)

 

d. What sort of policies might prevent this excessive use?

Verified Answer and Explanation

Explanation

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Verified Answer

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