Assignment:
Question 1. Why is the depreciation of capital good a cost of society? In what ways does a person's health depreciate?
Question 2. Why might older people's healthcare expenditures increase in the Grossman model even though their desired health stocks may be lower?
Question 3. List at least three factors that might increase an individual's marginal efficiency of investment in health capital.
Question 4. The deductible feature of an insurance policy can affect the impact of moral hazard. Explain this in the context either of probability of treatment and/or amount of treatment demanded.
Question 5. Describe the benefits to society from purchasing insurance. Describe the costs. Define and discuss the welfare gains from changes in insurance coverage.
Question 6. If only risk-averse people will buy health insurance, why do many people who buy health insurance also buy lottery tickets (an activity more consistent with risk taking)? Speculate on the differences and similarities.