Suppose that the cost of visiting a doctor once is $80, and an individual's marginal benefit of doctor visits is given by MB=170-15Q, where Q is the number of doctor visits.
a. How many times will this individual visit the doctor if he or she does not have insurance?
b. Now suppose that the individual purchases health insurance. Under his or her policy, the individual copays 25% of each doctor visit, while the insurance company pays the remaining 75%.
How many times will this individual visit the doctor now?
c. How much of a premium does the insurance company charge for the policy in part b assuming that the insurance company makes 0 profits?
d. How much deadweight loss is created as the result of moral hazard from this insurance policy? Show the deadweight loss in a figure and calculate the actual amount.