4. Moral hazard and health insurance pricing a. On a graph with fullness of coverage on the x axis and price per unit of coverage on the vertical axis, which corner would you most like to be in? (northeast, southeast, northwest, or southwest) b. Draw the graph referenced in Part A. Assume there is no moral hazard. Indicate where you would be on the graph. Mark this as point b. C. On the same graph as Part B add the set of possible insurance contracts an insurer would offer you after accounting for moral hazard. Indicate your new optimal point. Mark this as point c. d. On the same graph indicate utility loss due to moral hazard. e. Consider a completely risk averse individual that cares only about coverage level. On a new graph (with new utility curves) illustrate where they are in worlds with and without moral hazard. Label these points as above. f. Is this individual's utility loss greater or less than yours?

4. Moral hazard and health insurance pricing a. On a graph with fullness of coverage on the x axis and price per unit of coverage on the vertical axis, which corner would you most like to be in? (northeast, southeast, northwest, or southwest) b. Draw the graph referenced in Part A. Assume there is no moral hazard. Indicate where you would be on the graph. Mark this as point b. C. On the same graph as Part B add the set of possible insurance contracts an insurer would offer you after accounting for moral hazard. Indicate your new optimal point. Mark this as point c. d. On the same graph indicate utility loss due to moral hazard. e. Consider a completely risk averse individual that cares only about coverage level. On a new graph (with new utility curves) illustrate where they are in worlds with and without moral hazard. Label these points as above. f. Is this individual's utility loss greater or less than yours?

ECON MICRO

5th Edition

ISBN:9781337000536

Author:William A. McEachern

Publisher:William A. McEachern

Chapter14: Transaction Costs, Asymmetric Information, And Behavioral Economics

Section: Chapter Questions

Problem 3.8P

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