Suppose that the demand curve for healthcare is given by P=10-hc. Suppose that each visit is...

Suppose that the demand curve for healthcare is given by P=10-hc. Suppose that each visit is $4. if the coinsurance rate is %50, how many visits do we go on with health insurance?

Expert Solution

The demand curve for health care, P = 10 - hc and the Marginal cost of each visit = $4.

TR of health care = P*hc = (10 - hc)hc, therefore MR = 10 - 2hc. Since the coinsurance rate is 50% which means that half of the cost of the visit is borne by the insurance plan and the other half by the consumer. Therefore the Marginal cost of each visit becomes $2.

So the number of visits with health insurance is where MR = MC, 10 - 2hc = 2 => 2hc = 8 => hc = 4.

Therefore the number of visits ie equal to 4.

Rahul Sunny answered 2 years ago

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