anilnandyala wrote:
Health insurance Plan A requires the insured to pay $1000 or 50% of total cost, whichever is lower. Plan B requires the insured to pay the initial $300, but then pays 80% of the cost over $300. Which of the following is a cost level for which both insurance plans pay out the same amount?
$600
$1000
$3800
$5300
$6200
Pay out for plan A: Cost-$1,000
or Cost-0.5*Cost=0.5*Cost, when 0.5*Cost<$1,000;
Pay out for plan B: 0.8(Cost-$300);
The question is: for which of the following costs the pay outs are the same.
C-1,000=0.8(C-300) --> for C=3,800 and 0.5C=0.8(C-300) --> for C=800. As we have only $3,800 listed then it must be a correct answer.
Or you can use backsolving for this question:A. C=$600: pay out for plan A will be 0.5*600=300 (as 0.5*600<1,000) and pay out for plan B will be 0.8*(600-300)=240;
B. C=$1000: pay out for plan A will be 0.5*1,00=500 (as 0.5*1,000<1,000) and pay out for plan B will be 0.8*(1,000-300)=560;
C. C=$3800: pay out for plan A will be 3,800-1,000=2,800 (as 0.5*3,800>1,000) and pay out for plan B will be 0.8*(3,800-300)=2,800 -->
2,800=2,800;
D. C=$5300: pay out for plan A will be 5,300-1,000=4,300 (as 0.5*5,300>1,000) and pay out for plan B will be 0.8*(5,300-300)=4,000;
E. C=$6200:pay out for plan A will be 6,200-1,000=5,200 (as 0.5*6,200>1,000) and pay out for plan B will be 0.8*(6,200-300)=4,720.
Answer: C.
Hope it's clear.
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