type the correct answer in each box. winston used his past health history and information about his doctor…
type the correct answer in each box. winston used his past health history and information about his doctor visits to create this table to compare health costs with and without insurance. description of service probability of needing the service cost with insurance plan cost without insurance plan annual premium 100% $1,580 $0 five doctor visits 45% $125 $1,750 medication 75% $75 $325 what is the expected value of each option? the expected value of health care without insurance is $ the expected value of health care with insurance is $ reset next
Answer
Explanation:
Step1: Calculate expected cost without insurance
For annual premium, probability = 100% = 1, cost = 0; for five - doctor visits, probability = 0.45, cost = 1750; for medication, probability = 0.75, cost = 325. Expected value without insurance = (1\times0+0.45\times1750 + 0.75\times325) [ \begin{align*} &=0 + 787.5+243.75\ &=1031.25 \end{align*} ]
Step2: Calculate expected cost with insurance
For annual premium, probability = 100% = 1, cost = 1580; for five - doctor visits, probability = 0.45, cost = 125; for medication, probability = 0.75, cost = 75. Expected value with insurance = (1\times1580+0.45\times125 + 0.75\times75) [ \begin{align*} &=1580+56.25 + 56.25\ &=1692.5 \end{align*} ]
Answer:
The expected value of health care without insurance is $1031.25. The expected value of health care with insurance is $1692.5.