18 Questions
What is the primary factor that influences consumer response to a financial gamble in prospect theory?
The frame of reference and the weights assigned to outcomes
According to prospect theory, what is the primary consideration for consumers when evaluating a financial gamble?
The framing effect of the gamble
What is the primary difference between prospect theory and expected utility theory?
The consideration of framing effects in decision-making
How do consumers seeking to maximize expected utility respond to random losses in the expected utility model?
They select a policy with full coverage and no coinsurance
What is the relationship between the size of the deductible and the loading fee in the expected utility model?
The larger the deductible, the higher the loading fee
How do the weights assigned to outcomes influence consumer response to financial gambles in prospect theory?
They increase the attractiveness of high-probability outcomes
What is a potential argument against insuring predictable, low-cost preventative measures?
They may reduce the demand for other medical treatments
Which model challenges the traditional expected utility maximization model by incorporating psychological and emotional factors?
The prospect theory model
According to prospect theory, how do people respond to gains in their well-being?
They are risk averse
What is a key factor that influences consumer response to a financial gamble, according to prospect theory?
The framing of the gamble
What is a characteristic of people's attitudes towards losses, according to prospect theory?
They are risk seeking
How does the prospect theory model deviate from the traditional expected utility maximization model?
It incorporates psychological and emotional factors
What is the private benefit of vaccination for Person i in the described scenario?
Cπi
What is the condition for the social benefit of vaccination to exceed the private benefit?
CΣj≠i πij > Cπi
What is the implication of the externality benefit on the social willingness to pay for vaccination?
It increases the social willingness to pay
What happens to the private willingness to pay for vaccination if the number of vaccinated individuals exceeds N2?
It decreases
What is the relationship between the number of vaccinated individuals (N1) and the threshold (N2) for private decisions to lead to vaccination?
N1 < N2
What is the consequence of ignoring the externality benefit in the described scenario?
Under-vaccination
Test your knowledge of health economics with this quiz on preventative measures and their impact on healthcare spending and demand. Answer questions on the effects of insuring predictable, low-cost preventative measures and challenges to traditional expected utility maximization models.
Make Your Own Quizzes and Flashcards
Convert your notes into interactive study material.
Get started for free
