Economics

MLS [5 pts] Suppose that the typical inverse demand for trips to the dentist by a patient is given by p=1D-200q. Assume that there are lots of patients. Dentists charge $400 per visit, either to the insurer or to the patient, and this represents their average cost per visit. If there is an insurer, it charges a premium which comes straight out of the wealth of consumers. Assume that the premium is fair and reects use of dental visits by all consumers, not just the specic consumer. [a] Find the optimal number of visits that would happen in order to maximize consumer welfare less the costs of dentistry. {13) Suppose that the insurer covers 50% of the dental cost. Does this lead to an increasefdecrease in consumer welfare [i.e. the sum of consumer surplus less premiums]? Show how much