4.3 There is a 1 percent chance that you will have healthcare bills of$100,000; a 19 percent chance that you will have healthcare bills of$10,000; a 60 percent chance that you will have healthcare bills of$500; and a 20 percent chance that you will have healthcare bills of $00. What is your expected healthcare spending?

4.4 There is a 1 percent chance that you will have healthcare bills of$100,000; a 19 percent chance that you will have healthcare bills of $10,000; a 60 percent chance that you will have healthcare bills of$500; and a 20 percent chance that you will have healthcare bills of $0. What will your expected insurance benefits be? Would you be willing to buy complete insurance coverage if it cost $3,712? Explain.

4.5 Instead of complete insurance, you have a policy with a $5,000deductible. What will your expected out-of-pocket spending be? What will your expected insurance benefits be? Assuming that the premium equals 116 percent of expected insurance benefits, do you prefer the policy with a $5,000 deductible or complete coverage? Explain.

Questions 7.5 to 7.6 (both inclusive) on page 119 of Lee’s text.

7.5 Average visits per week equal 640 when the copay is $40 and 360when the copay is $60.a. Calculate the percentage change in visits, percentage change in price, and price elasticity of demand using 640 and $40 as the denominators for percentage change calculations.

b. Calculate the percentage change in visits, percentage change in price, and price elasticity of demand using 360 and $60 as the denominators for percentage change calculations.

c. Calculate the percentage change in visits, percentage change in price, and price elasticity of demand using 500 and $50 as the denominator for percentage change calculations. (This is an arcelasticity calculation.)

d. How do your answers differ?

7:6 Sales are 3,100 at a price of $200 and 2,400 at a price of $300.Calculate the price elasticities of demand using $200 as the base value, then use $300 as the base value. Calculate the arc price elasticity and compare the three calculations. How do your answers differ?

Questions 8.1 to 8.3 (both inclusive) on page 134 of Lee’s text.

8.1 The table lists visits for each of the four clinics operated by your system. You anticipate that volumes will increase by 4 percent next year. Forecast visits for each clinic, and explain what assumptions underlie your forecasts. For example, are you sure that all of the clinics can serve additional clients?

8.2 Your data suggest that Clinic 2 is operating at capacity and highly efficient. Its output is unlikely to increase. Furthermore, Clinic 4 has unused capacity but is unlikely to attract additional patients. How would these facts change your answer to question 1? Continue to assume that overall volume will rise to 121,139.

8.3 You estimate that the price elasticity of demand for clinic visits is -0.25 You anticipate that a major insurer will increase the copayment from $20to $25. This insurer covers 40,000 of your patients, and those patients average 2.5 visits per year. What is your forecast of the change in the number of visits?

Please refer to Feldstein’s text (pg 66 towards the middle). Feldstein says “It is for this reason that physicians and other suppliers whose market demand curves are price inelastic do not favor price competition.” Use Figure 33 from Feldstein’s text and your e=own examples to explain this statement.

Questions 4.3 to 4.5 (both inclusive) on page 74 of Lee’s text

4.3 There is a 1 percent chance that you will have healthcare bills of$100,000; a 19 percent chance that you will have healthcare bills of$10,000; a 60 percent chance that you will have healthcare bills of$500; and a 20 percent chance that you will have healthcare bills of $00. What is your expected healthcare spending?

4.4 There is a 1 percent chance that you will have healthcare bills of$100,000; a 19 percent chance that you will have healthcare bills of $10,000; a 60 percent chance that you will have healthcare bills of$500; and a 20 percent chance that you will have healthcare bills of $0. What will your expected insurance benefits be? Would you be willing to buy complete insurance coverage if it cost $3,712? Explain.

4.5 Instead of complete insurance, you have a policy with a $5,000deductible. What will your expected out-of-pocket spending be? What will your expected insurance benefits be? Assuming that the premium equals 116 percent of expected insurance benefits, do you prefer the policy with a $5,000 deductible or complete coverage? Explain.

Questions 7.5 to 7.6 (both inclusive) on page 119 of Lee’s text.

7.5 Average visits per week equal 640 when the copay is $40 and 360when the copay is $60.a. Calculate the percentage change in visits, percentage change in price, and price elasticity of demand using 640 and $40 as the denominators for percentage change calculations.

b. Calculate the percentage change in visits, percentage change in price, and price elasticity of demand using 360 and $60 as the denominators for percentage change calculations.

c. Calculate the percentage change in visits, percentage change in price, and price elasticity of demand using 500 and $50 as the denominator for percentage change calculations. (This is an arcelasticity calculation.)

d. How do your answers differ?

7:6 Sales are 3,100 at a price of $200 and 2,400 at a price of $300.Calculate the price elasticities of demand using $200 as the base value, then use $300 as the base value. Calculate the arc price elasticity and compare the three calculations. How do your answers differ?

Questions 8.1 to 8.3 (both inclusive) on page 134 of Lee’s text.

8.1 The table lists visits for each of the four clinics operated by your system. You anticipate that volumes will increase by 4 percent next year. Forecast visits for each clinic, and explain what assumptions underlie your forecasts. For example, are you sure that all of the clinics can serve additional clients?

8.2 Your data suggest that Clinic 2 is operating at capacity and highly efficient. Its output is unlikely to increase. Furthermore, Clinic 4 has unused capacity but is unlikely to attract additional patients. How would these facts change your answer to question 1? Continue to assume that overall volume will rise to 121,139.

8.3 You estimate that the price elasticity of demand for clinic visits is -0.25 You anticipate that a major insurer will increase the copayment from $20to $25. This insurer covers 40,000 of your patients, and those patients average 2.5 visits per year. What is your forecast of the change in the number of visits?

Please refer to Feldstein’s text (pg 66 towards the middle). Feldstein says “It is for this reason that physicians and other suppliers whose market demand curves are price inelastic do not favor price competition.” Use Figure 33 from Feldstein’s text and your e=own examples to explain this statement. (10 points)