Rudy’s demand for specialist’s office visits (Q): Q = 870 / (out of pocket)?
Ex. If price or out of pocket = $435, no. of office visits = 2
a. The uninsured price of an office visit to the specialist is $290. When Rudy was uninsured how many office visits did he have?
b. After insurance, Rudy doubled his office visits. What is Rudy’s new specialist’s office visit copay?
c. This can be translated to what coinsurance rate?
d. Given the classical theory of moral hazard, what is the social loss to Rudy getting insurance as far as specialist office visits are concerned?
e. Graph the demand curve. Label the prices, quantities and indicate the location of the social loss.
f. If the coinsurance rate drops to 10% what is the new copay and the number of office visits? What is the new social loss due to moral hazard (classical)?
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