Wednesday, May 28, 2014

econ review question 10



a clever health insurance executive notes that policy holders with a $40 co-pay use four visits/year on average.  He decides to offer a plan where the annual policy price is raised by $160, but the co-pay is dropped to $0.

use marginal benefit/marginal cost analysis to make a prediction about utilization under the new arrangement – increase/decrease/remain the same.

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