suppose the person acquires a chronic disease and his health depreciation rate rises to 35% annually. What is the new optimal level of health this person should demand now having the chronic disease? assume the health production function is h equals 365-1 divided by H where h is the number of healthy days a person has in each year and H is the persons health capital. Assume this person earns $100 a day and the marginal cost of health investment is pi equals 25 and remains constant overtime. The annual interest rate is 5% and health capital depreciates at a rate of 15% per annum

suppose the person acquires a chronic disease and his health depreciation rate rises to 35% annually. What is the new optimal level of health this person should demand now having the chronic disease? assume the health production function is h equals 365-1 divided by H where h is the number of healthy days a person has in each year and H is the persons health capital. Assume this person earns $100 a day and the marginal cost of health investment is pi equals 25 and remains constant overtime. The annual interest rate is 5% and health capital depreciates at a rate of 15% per annum

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter18: Asymmetric Information

Section: Chapter Questions

Problem 18.9P

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Assume the health production function is h = 365 – 1/H, where h is the number of healthy days a person has in each year and H is the person's health capital. Assume this person earns a wage of $100/day, and the marginal cost of health investment n = 25 and is constant over time. The annual interest rate is 5 percent, and health capital depreciates at a rate of 15 percent per annum. What is the optimal level of health this person demands? O 2.5 O 3.62 O 4.47 5.69
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