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Part 2 (50%) Consider the demand for medical care of Alice and Blake. Let Q be the number of visits to doctor by each individual

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Part 2 (50%) Consider the demand for medical care of Alice and Blake. Let Q be the number of visits to doctor by each individual and P is the price per visit. Alice's health status is such that she needs to be seen by the doctor 10 times a year, that is Q; = 10. Blake's annual demand curve for visits to the doctor is Q3 = 20 0161'. The government contemplates two health insurance schemes. First, a 50% coinsurance rate, where each insured person pays 50% of the price of a visit to the doctor- Second, the patient pays the full price of the rst four visits to the doctor and the government pays the full price for every visit in excess of the rst four A. Assuming that the market price for a visit to the doctor is 100, nd the number of visits for Alice and Blake without insurance, with coinsurance and with excess. B. Explain whether Alice's and Blake's purchase of health insurance created moral hazard (20%). C. Which of the two insurance systems will the government introduce if it is interested in minimizing its outlays to pay for insurance

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