Assume another policy (Policy Y) that lowers the price from $1,000 to $400 (which yields to an increase in medical care usage from 10 to 15). 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
Solve for the social loss resulting from Policy Y. Hint: triangle formula: 1/2 x