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- Suppose that some members of a population are infected with a sexually transmitted virus that causes disease X, and some are infected with another sexually transmitted virus that causes disease Y. Some members of the population may be infected with both viruses. While diseases X and Y are similar in that they are both sexually transmitted diseases, the disease X is much more harmful to its carriers than the disease Y is to its carriers. Condom use is highly effective in preventing the transmission of either disease. Suppose scientists discover a cure for the sexually transmitted disease X. This cure (a vaccination) will eliminate the virus causing the disease X from its carrier before its carrier can suffer any harm from the virus. Everybody is immediately given this vaccination against the disease X. a. What do you expect to happen to the prevalence of the virus causing the disease X in the population? Draw a graph with time on the horizontal axis and prevalence of the virus causing…Suppose that some members of a population are infected with a sexually transmitted virus that causes disease X, and some are infected with another sexually transmitted virus that causes disease Y. Some members of the population may be infected with both viruses. While diseases X and Y are similar in that they are both sexually transmitted diseases, the disease X is much more harmful to its carriers than the disease Y is to its carriers. Condom use is highly effective in preventing the transmission of either disease. Suppose scientists discover a cure for the sexually transmitted disease X. This cure (a vaccination) will eliminate the virus causing the disease X from its carrier before its carrier can suffer any harm from the virus. Everybody is immediately given this vaccination against the disease X. What do you expect to happen to the rate of condom use in the population over time? Add a curve for the rate of condom use to your graph.Provide an example of Moral Hazard from personal observation or experience.
- How might adverse selection make it difficult for an insurance market to operate?Distinguish the difference between adverse selection and moral hazard.The Orphan Drug Act of 1983 provides tax incentives, patent protection, and research subsidies to firms for drugs, vaccines, and diagnostic agents if they are intended to treat a disease that affects less than 200,000 citizens. Explain how the Orphan Drug Act would affect drug development. Can you think of any tradeoffs from the act?
