Demand for insurance: P=26,000−75Q Marginal cost: MC=13,000−41.67Q Average cost: AC=13,000−20.83Q where Q is millions of Americans aged 0-64. With these parameters, it turns out that the market equilibrium is Q ∗
=240 million, which is where P=AC=8,000. Also, Q max
=275 million, or with 35 million or 12.7% of the population under age 65 still uninsured. (If you solve for the equilibrium using the symbolic math equations and parameters printed above, which are rounded, you get very similar numbers: Q ∗
=239.99 and P=8,001.) Demand exceeds marginal cost at Q ∗
and all the way up to Q max
. Thus the annual social loss of underinsurance is the area of a trapezoid between Q ∗
and Q max
and between demand and marginal cost, which equals $154.583 billion. (With symbolic math it is $154.687.)