Suppose that the market demand for physical therapies is given by the equation P=100-Q. The cost of each therapy is 40.

a. What is the socially optimal number of physical therapies?

b. Suppose that the price of physical therapies is 40. Suppose further that patients have insurance that pays for 50% of the price of physical therapies. How many physical therapies will be purchased? What is the amount of deadweight loss from insurance moral hazard?

c. How would your analysis of deadweight loss change if the service in question was open heart surgery? (Answer using qualitative response.)