Question

Health insurance often pays 80 percent of health care costs. This situation will encourage the rational consumer to _________.

Answer 1

Answer:

correct answer is Use more medical services than they would if they had to paid the full price

Explanation:

given data

pay cost =  80 percent of health care

solution

when there is no insurance, consumer consumes medicinal service

until marginal benefit is equal to marginal cost     .................1

here when insurance =  80 percent

then consumer will pay 20% cost at optimal marginal benefit

so

marginal benefit  = 0.2 × marginal cost  

so insurance more medical services will be taken compared to no insurance