eco question

QUESTION 1

Consider the following case:

Bob has a pre-existing condition that costs $10,000 per year. Calculate the fair and full insurance premium for Bob. Bob’s utility function is U equals square root of I . Is he better off buying the insurance or not?

What happens to insurance firms if they are forced to offer insurance policies that cover pre-existing conditions?

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10 points

QUESTION 2

Why is the following statement considered a myth by health economists? Use reasoning and evidence from the course.

Covering the uninsured pays for itself by reducing expensive and inefficient emergency room care.

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10 points

QUESTION 3

Politicians are considering a policy that would fully privatize Medicare. From an economics perspective, what would be the likely effect? (Think of moral hazard, adverse selection, prices, and number of people who have insurance)

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10 points

QUESTION 4

What is adverse selection? What are three different policies that reduce or eliminate adverse selection?

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10 points

QUESTION 5

What is moral hazard? What are three different policies that reduce or eliminate moral hazard?