PART 1   T/F 要解释的

1.      Uncertainty regarding theeffectiveness of a specific health service for a particular individual is animportant reason why patients have difficulty assessing quality of care.

2.      If wedefine a health care service as needed if the expected health effect for aperson is positive, then society should ensure that all health care needs aremet.

3.      A doctorwho acts as a perfect agent for her patients will always provide care that isexpected to improve a patient's health.

4.      The effectiveness of poolingfinancial risk through insurance increases as the number of individuals in therisk pool grows.

5.      Adverse selection is likely to bemost severe when the government requires private insurance companies to chargeall individuals the same premium

6.      Riskaversion is a necessary condition for insurance to be welfare improving to anindividual.

PART 2Suppose an individual has the following utility function defined overwealth:  U = U().   The individual hasan initial wealth level of $20,000.   a.       Theindividual has a 20% chance of a heart attack and the loss associated with theattack is $5000.                                                   i.     What is the expected loss from a heart attack?                                               ii.     What is the maximum amount this individual is willingto pay for insurance against a heart attack?                                             iii.     What is the risk premium?   b.      Anew drug has been developed that is effective in preventing heart attacks.  Taking the drug reduces the chance of a heartattack to 10%, but the loss associated with the attack increases to$10,000.                                                   i.     Now what is the expected loss?                                               ii.     What is the maximum amount this individual is willingto pay for insurance against a heart attack?                                              iii.     What is the risk premium?c.       Explainwhy some of the answers change before and after the individual begins takingthe drug.