Assume that 5% of the people who receiveTreatment A die. The sixty percent who fullyrecover live another 10 years. The treatment isonly partially successful for 35% of the patients,who live another 4 years. What is the expectedvalue of Treatment A, expressed as additionalyears of life?

here we calculate the expected value of treatment A expressed as additional years of life by…

Treatment A die. The sixty percent who fully recover live another 10 years. The treatment only partially successful for 35% of the patier who live another 4 years. What is the expect value of Treatment A, expressed as additiona years of life?

Treatment A die. The sixty percent who fully recover live another 10 years. The treatment only partially successful for 35% of the patier who live another 4 years. What is the expect value of Treatment A, expressed as additiona years of life?

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter20: The Problem Of Adverse Selection Moral Hazard

Section: Chapter Questions

Problem 3MC

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Question

Assume that 5% of the people who receive
Treatment A die. The sixty percent who fully
recover live another 10 years. The treatment is
only partially successful for 35% of the patients,
who live another 4 years. What is the expected
value of Treatment A, expressed as additional
years of life?

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