Suppose the marginal social cost of providing health care to a person is given by the equation 20+4Q. An individual’s marginal benefit of health care is 300-Q. This individual has an insurance policy that stipulates that the person will pay 25% coinsurance OOP. That is, the recipient of the care will pay 25% of the MSC.
a. Solve for the optimal level of consumption and price of health care for this society.
b. Solve for the private market equilibrium level of health care. What is the social cost for the last unit at this level? (May not be round numbers.)
c. Calculate the deadweight loss.
d. What are the total OOP costs for this individual?