Healthcare Moral Hazard

An individual's demand for physician office visits in a given year is given by, Q = 14 - 0.075P, where Q is the number of office visits and P is the out-of-pocket price paid by the individual for each visit. Assume the market price of an office visit is $150.

Use this information to answer the questions below.

Questions (4):

1. Without insurance, how many office visits would the individual make in one year?

NOTE: Enter a formula to calculate the number of visits, rounding your answer to the nearest whole number.

2. Suppose the individual does have insurance and pays only a $40 co-payment for each visit. How many office visits will the individual make in one year?NOTE: Again, enter a formula, rounding your answer to the nearest whole number.

3. What is the moral hazard and deadweight loss (DWL) associated with this individual having insurance? NOTE: Enter formulas in the respective boxes below.

Moral Hazard:

Deadweight loss (DWL):

4. Enter a formula to calculate the proportion of total expenditure on office visits (for this individual with insurance) that is deadweight loss.