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Consider the following information on Elizabeths demand for visits per year to her health clinic. (She does not have insurance: 100% coinsurance). Derive the equation.
Consider the following information on Elizabeths demand for visits per year to her health clinic. (She does not have insurance: 100% coinsurance).
- Derive the equation. Elizabeth has been paying $40 per visit. How many visits does she make per year? Calculate her total expenditures?
- The insurance company institutes a 50 percent coinsurance feature (Elizabeth pays 50 percent of the price of each visit)? What is her new equilibrium number of visits? Calculate the new total expenditures on visits.
- Calculate the expenditures by the insurer.
- Calculate the increased well-being to the consumer due to the changed number of visits.
- Calculate the loss to society brought about by moral hazard.
- What is Moral Hazard? What are the ways that could be used by insurance companies to reduce moral hazard?
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