Anonymous
Anonymous asked in Social ScienceEconomics · 4 weeks ago

Assume the classical or conventional theory of moral hazard...?

...Given uninsured price of a procedure = $3,000. 8 procedures were conducted in a month. When the hospital started accepting insurance that lowered out of pocket to $500, monthly procedures increased to 25.  

a. What is the coinsurance rate of the policy?

b. Solve for the value of social loss if any.

c. Graph the demand curve. Label the prices, quantities and indicate the location of the social loss.

d. Applying the new theory (Nyman) to this example, assume the procedure is only cosmetic. What is the value of social loss due to insurance? What kind of moral hazard is created?

e. Applying the new theory (Nyman) to this example, assume the procedure is critical enough that these patients will likely die if the procedure is not given. What is the value of social loss due to insurance? In terms of efficiency what kind of moral hazard is created?

f. Applying the new theory (ideal health level) to this example, assume every month there are 8 individuals that need the procedure and they all get the procedure ahead of everyone else (those who do not need it), what is the value of social loss due to insurance?

g. Applying the new theory (ideal health level) to this example, assume every month there are 25 individuals that need the procedure and they all get the procedure ahead of everyone else (those who do not need it), what is the value of social loss due to insurance?

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