The insurance market consists of high-risk patients, who average $50,000 in spending per year, and low-risk patients, who average $500 per year. Low-risk patients represent 92 percent of the population. What would average spending be?

Answers:	$7,925
	$5,450
	$4,460
	$2,975

The demand for medical care is usually inelastic because

Answers:	consumers have excellent information about costs and benefits of care.
	consumers perceive that there are few good substitutes for medical care.
	demand is unaffected by changes in price.
	all of the above.

Cost equals 20,000 + 10*Quantity. If volume is 500, incremental cost will equal

Answers:	(20000 + 10*500) (20000 + 10*499)/500 499.
	$499.
	$500.
	((20000 + 10*500) (20000 + 10*499))/(500 499

Initially a pharmacy with a volume of 35,000 had fixed costs of $200,000 and variable costs of $140,000. After remodeling, its fixed costs fell to $100,000 even though its volume and variable costs were unchanged. As a result,

Answers:	its inframarginal costs will be lower.
	its incremental costs will be lower.
	its average costs will be lower.
	All of the above

The price elasticity of demand is 0.20. Demand is

Answers:	elastic.
	unit elastic.
	inelastic.
	none of the above.