Mandatory health insurance plan

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Reference no: EM13868699

1. A mandatory health insurance plan costs $4,000. One worker earns $24,500 in employment income and $500 in investment income. Another worker earns $48,000 in employment income and $2,000 in investment income. A third worker earns $68,000 in employment income and $7,000 in investment income. A premium-based system would cost each worker $4,000. A wage tax–based system would cost each worker 8.5 percent of wages. An income tax–based system would cost each worker 8 percent of income. For each worker, calculate the cost of the insurance as a share of total income.

2. Which of the payment systems in Exercise 1.3 would impose the larger burden on those with incomes under $25,000: a plan financed via premiums, via the income tax, or via a payroll tax?

3. Which of the preceding questions can you answer using positive economics? For which of the preceding questions must you use normative economics?

Reference no: EM13868699

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