QUESTION 5 If the original price of medical care (with no insurance) equal $1,00

Question

QUESTION 5 If the original price of medical care (with no insurance) equal $1,000, the quantity demanded = 10. If insurance is provided, out of pocket drops to $300. Also the quantity of medical care that will be demanded rises to 40. Is there a social loss due to insurance?

a. Yes

b. No

c. not sure

d. none of the above

QUESTION 6 From the previous problem if there is social loss how much is it?

a. there is no social loss

b. $21,000

c. $10,500

d. $3,500

e. none of the above Q

UESTION 7 Which situation provides the potential for the largest social loss due to insurance?

a. large price distortion and steep demand curve

b. small price distortion and steep demand curve

c. large price distortion and relatively flat demand curve

d. small price distortion and steep demand curve

QUESTION 8 Marcus and Jameis have identical insurance policies except that Marcus coinsurance rate is 20% whileJameis coinsurance rate is 18%. Whose policy will create a greater social loss or moral hazard?

a. Marcus

b. Jameis

c. social loss would be identical

d. none of the above

QUESTION 9 Hassan and Chris have identical insurance policies except that Hassan's copay is $20 while Chris copay is $18. Whose policy will create a greater social loss or moral hazard?

a. Hassan

b. Chris

c. the social loss each one provides will be identical

d. none of the above

QUESTION 10 Dan and Joe have identical insurance policies except that Dan has a deductible of $1,000 while Joe's deductible is $1,800. Whose policy will create a greater social loss or moral hazard?

a. Dan

b. Joe

c. they will provide identical social losses

d. not enough information

e. none of the above

Explanation / Answer

5.

Demand increases = 40/10 = 4 times

Pocket expense drops to = (1,000/300) = 3.33 times

Since demand increases more than expense dropping rate, there is no social loss.

Answer: b. No.

6.

There is no social loss, as mentioned above.

Answer: a

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