Suppose the marginal social cost of providing health care to a person is given by the equation 20+4Q An individualâ€™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?
A corporation produces output with a constant market price of $70 per unit The marginal product of capital is 1/(2K), where K is units of capital, with each unit assumed to be worth $1 The life span of the capital is 10 years, implying the straight line depreciation rate ?=10 The financing cost of capital is ?=10 Also, assume the discount rate to use in any present value calculations is 10
a What is the optimal level of capital for the firm?
b Suppose the corporate tax rate on accounting profits is 40% The firm can include depreciation at the rate ? per year in its accounting costs, but not its financing costs What is the optimal level of capital for the firm?
c For the scenario in b, what is the effective corporate tax rate?
d Same assumptions as b Except, now suppose the government allows the firm to depreciate 25% of its capital costs immediately, while the remainder depreciates at the straight line rate ?, what is the optimal level of capital for the firm?