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Sarah's demand for routine medical visits is q = 10 - 0.2p when she is healthy and q = 20 - 0.2p ...

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Sarah's demand for routine medical visits is q = 10 - 0.2p when she is healthy and q = 20 - 0.2p ...

Sarah's demand for routine medical visits is q = 10 - 0.2p when she is healthy and q = 20 - 0.2p when she is sick. Medical visits cost $50 each if Sarah has no medical insurance. She is sick 20% of the time. Sarah is considering two different insurance plans. One offers free medical visits; the other plan costs less up front but requires that Sarah pay $5 per medical visit. Compare the two plans in terms of the trade-off between risk and moral hazard.

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Microeconomics

Edition: 6^th

Author: Perloff

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