Using Figure 6-2, calculate the price elasticity of demand (dropping all minus signs) between P = 4 and P = 6.

Sarah's demand for routine medical visits is q = 10 - 0.2p when she is healthy and q = 20 - 0.2p when she is sick. Medical visits cost $50 each if Sarah has no medical insurance. She is sick 20% of the time. Sarah is considering two different insurance plans. One offers free medical visits; the other plan costs less up front but requires that Sarah pay $5 per medical visit. Compare the two plans

in terms of the trade-off between risk and moral hazard. What will be an ideal response?

For an individual's supply curve of labor to be backward bending:

a. the substitution effect must be greater than the income effect. b. the substitution effect must be equal to the income effect. c. the substitution effect must be less than the income effect. d. is an impossibility.