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Healthcare Economics Scenario

Mrs. Siegal has two alternative activities to help relieve her backache. In the first, she can visit a physiotherapist. The total time for a physiotherapist visit, including travel and waiting, is two hours. Mrs. Siegal earns a wage of $20 an hour. Physiotherapists charge $50 per visit, and Mrs. Siegal does not have any health insurance. As a second alternative, Mrs. Siegal can take pain killers. Each pill costs 50 cents, and Mrs. Siegal needs to take 30 pills per month. The two treatments are not equally effective. The physiotherapy visits yield 10 additional healthy days per month, while the pills yield 6 healthy days.

a. If Mrs. Siegal can only choose one alternative, and if she wants to maximize the most healthy days per dollar that she gets, which option will she choose?
b. If the price of a pill increases to $3, which option will she choose?

Solution Preview

A. If Mrs. Siegel can only choose one alternative, and if she wants to maximize the most healthy days per dollar that she gets, she would choose the option of taking painkillers. ...

$2.19