(Solved):Assume another policy (Policy Y) that lowers the price from $1,000 to $200 (which yields to an increase in office visits from 10 to 50). Which policy has a greater incentive for moral hazard? —–… View Answer…

 

Question

Assume another policy (Policy Y) that lowers the price from $1,000 to $200 (which yields to an increase in office visits from 10 to 50). Which policy has a greater incentive for moral hazard? ——–

a. Policy X

b. Policy Y

c. both policies have equal impact in raising moral hazard likelihood

d. all of the above

e. none of the above

 

EXPERT ANSWER

The answer is c. both policies have equal impact in raising moral hazard

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