Economics 330t Problem Set 2 Solutions Fall 2015

This study source was downloaded by 100000802832151 from CourseHero.com on 11-01-2022 10:59:07 GMT -05:00https://www.coursehero.com/file/12430115/Problem-Set-2-Solutions/ Economics 330T: Fall 2015 Helen SchneiderProblem Set 2SOLUTIONSI. Demand for Medical Care1. #8, Chapter 4, p. 112. ( 15 points )Five visits is totally irrational. To get to five visits, the consumer must forgo the consumer surplus triangle traced out by the upper price line ($20), the demand curve, andthe vertical portion of the price line. (Call this triangle A.) It would be better to stop at two visits and not lose this consumer surplus. Once having gotten to five visits, the consumer could increase the overall consumer surplus by moving to seven visits. The amount of extra consumer surplus is the triangle traced out by the lower price line ($20 X0.2 = $4), the demand curve, and the vertical portion of the price line. (Call this triangle B.) Thus, either two or seven visits must be better than five visits. To know whether two or seven visits is better, one must compare the loss (A) with the gain (B) . If BA in area, then seven visits is better. To consume exactly five visits would be irrational.2. #9, Chapter 4, p. 112. ( 10 points