1. a. On a market diagram illustrate the size of social loss with full insurance for outpatient visits. (Note outpatient visits are not perfectly elastically supplied.)

b. Suppose the insurer implements 25% coinsurance. On the same diagram add a line indicating the new demand curve with coinsurance. Illustrate the change in social loss.

c.Given that we can reduce social loss with coinsurance why don't we charge coinsurance for Medicaid?