Answer to Question #91593 in Microeconomics for Harry Kasu

Question

Mary is planning to travel to a country where there is some risk of contracting malaria. The market price for the medication that prevents malaria is $400 (the preventative medicine is not covered by insurance). It would take her 2 hours to visit her doctor and get the prescription filled. The opportunity cost of her time is $50/ hour.
If she contracts malaria we assume that she will be sick for two weeks and unable to work. Expenses for medication, doctors’ visits, and lab tests to treat malaria will be $1500. She will lose wages and benefits of $1000 for each week she is away from work. Assume the cost of the pain and suffering is $2000.
Mary believes that her chance of getting malaria without preventative medicine is about one in 10.
A.Would it be logical for her to buy the medication? Why or why not? Be specific.
B.What is the maximum price that Mary would pay for the medication if she has no insurance?

Answer 1

A. It would be logical for Mary to buy the medication because if she contracts malaria she will be forced to use more money. The amount of money that she will use to buy the medicine is less than the amount of money she will use to treat malaria.

B.Preventive medication= ($50X2) + $400= $ 500

If she contracts malaria= $1500+ ($1000X2) + $2000 = $5500