2013 $ (Thousands) 25-34 35-44 45-54 55-64 65-74 75+ Age - - - High School College I FIGURE 2: TOTAL I-IZEALTHCARE SPENDING BY EDUCATION AND AGE Notes: Total healthcare spending includes aggregate healthcare spending taking into account out-of- pocket medical spending, payments by private and public insurance and other sources, excluding over the counter drugs and indirect payments not related to specic medical events. Source: Margaris and Wallenius (2020) using data from MEPS, 2000-13. 2. (5%) Figure 3 shows the average healthcare spending from all sources by age, education and health in 2013 USD. Succinctly describe Figure 3. Explain how Figures 2 and 3 are consistent. 20 a 15 "d 5 E 10 so 5 (O S N 2534 35-44 4554 5564 65-74 75+ Age - - - High School - Healthy ----- College - Healthy High School - Unhealthy College - Unhealthy FIGURE 3: TOTAL HEALTHCARE SPENDING BY EDUCATION, HEALTH AND AGE Notes: "Good Health" is defined as the self-reported level of health of "Good", "Very Good" or "Excel- lent" and "Bad Health" as a level of health of "Fair" or "Poor". 3. (10%) In Figure 2 health care spending increases dramatically over the life cycle. Is this consistent with the Grossman model? Health care spending increases over age in Figure 3 but not at the same pace. Explain how this can be consistent with Figure 2. 4. (5%) In the Grossman model individuals have a maximum lifespan 0 and they choose the timing of their death by letting their health reach Hmin before age 0 or their age reaches 0. Suppose that the maximum lifespan O is lower for high school compared to college graduates. How does this affect the demand for health if 0 is lower because of (i) lower initial level of health and (ii) higher rate of depreciation 7. What happens if 7 is determined by health