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In: Economics

Treatment A costs $50,000 and extends life by 10 years. Treatment B costs $75,000 and extends...

Treatment A costs $50,000 and extends life by 10 years. Treatment B costs $75,000 and extends life by 15 years. What is the incremental cost-effectiveness ratio for Treatment B? What additional information would you need to determine if Treatment B is worth the additional cost?

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Expert Solution

Treatment A : 50000 for 10 yrs, so we can say we pay 5000 for every additional year. And if we were to add 5 more years, this treament should cost us 5×5000 = 25000 more dollars, or 75000 in total.

Treatment B : 75000 for 15 years, it also means 5000 dollars for every year.

Cost effectiveness ratio is defined by the difference in cost between two possible interventions, divided by the difference in their effect.

= 75000-50000/ 15-10 = 25000/5 = 5000

Rahul Sunny answered 1 year ago
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