750 points Samantha\'s wllingness to pay for hospital recovery time following he

Question

750 points Samantha's wllingness to pay for hospital recovery time following her upooming sungery is a. If Samantha is uninsured, and the cost of providing a hosptal room is $250 per day, how many days wil she stay in the hospital following her operation? b. How many days would Samantha stay if her insurance covered haff the cost of each hospital day? days) t $300 for the frst day, $200 for the second, $100 for the third, $50 for he fourth, and nothing for the days beyond our days) the cost of each hosptal day? da) that Samantha's insurance stops covering hospital stays and inshead reduces the cost of her health insurance by $225 c. Now suppose How many days would Samantha stay in the hospital under this new policy?dayls) Relative to part b, is Samantha beher off under this policy?Ck toseiat) Relative to part b, is Samantha's insurance company better oftf under this policy? (Click to seecet) s 5 2 5 2

Explanation / Answer

Question 1. Samantha will only be willing to stay for 1 day .

Explanation: As her as the amount she is willing to pay on the first day is $300 and $200 on the second day. The room charges per day is $250 and it is $50 more than what she is willing to pay on the second day.

Question 2. Samantha will be willing to stay for 2 days

Explanation: She will stay for 2 days since the insurance covers half the hospital cost for each day which is $250/2 = $125. But on the third day she is willing to pay only $100. So she will vacate after the second day.

Question 3. She will be staying only for 1 day.

Explanation: Since the hospital has stopped insurance coverage for hospital stays, it effectively means no insurance for stays. Since she is willing to pay $300 for the first day and the price of the room is $250 per day. She will stay for 1 day. On the second day the her willingness to pay is only $200 which is $50 less than the room cost of $250 . So she will vacate.

Question 4. Relative to part b, is Samantha better of under this policy?---

Answer: No.

Explanation: Samantha is not better off under this policy as she will be able to stay for an extra day if her hospital stay is covered.

Question 5. Relative Is the insurance company better off under this policy?--

Answer: Yes.

Explanation: Since the insurance company does not have to pay for the hospital days it benefits from avoiding the cost of $250 ( $125 + $125 for two days) beyond which Samantha is unwilling to pay as on the 3rd day she is only willing to bear a cost of $100. The cost of reducing health insurance cost to the health is $225 for the company but it is better than paying $250 for her two day stay.

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