Advanced Health Economics
Chapter Exam Questions
Course Introduction
Advanced Health Economics delves into the complex economic principles and analytical methods applied to the health care sector. The course examines the unique characteristics of health care markets, the role of government intervention, and the impact of insurance on demand and supply. Students will analyze models of provider behavior, health technology assessment, policy reforms, and the measurement of health outcomes and cost-effectiveness. Through critical evaluation of empirical research and case studies, the course equips students with tools to inform health policy, improve resource allocation, and address current challenges in global health economics.
Recommended Textbook Health Economics 6th Edition by
Rexford E. Santerre
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Page 2
Chapter 1: Introduction
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Q1) Which of the following is not a basic question that must be answered as a result of scarcity?
A) Who should decide the amount of money spent on medical goods and services?
B) Who should receive the medical goods and services that are produced?
C) What mix of nonmedical and medical goods and services should be produced in the macroeconomy?
D) What specific health care resources should be used to produce the chosen medical goods and services?
E) What mix of medical goods and services should be produced in the health economy?
Answer: A
Q2) Which of the following accounts for the greatest amount of health care spending?
A) Public health
B) Physician services
C) Prescription drugs
D) Nursing home care
E) Hospital services
Answer: E
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3
Chapter 2: Health and Medical Care: an Economic Perspective
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Q1) Advancements in medical technology allow people to obtain greater amounts of health with the same amount of medical care.
A)True
B)False
Answer: True
Q2) Which of the following is included in the health production function?
A) Age
B) State of medical technology
C) Gender
D) Income
E) All of the above
Answer: E
Q3) The reduction in the number of reported polio cases was due largely to government health programs.
A)True
B)False
Answer: False
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Page 4
Chapter 3: Cost and Benefit Analysis
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Q1) Which of the following is considered a shortcoming of the human capital approach?
A) It includes nonmarket returns
B) It is used to estimate the value of a human life
C) It includes labor market imperfections
D) All of the above
E) None of the above
Answer: C
Q2) Lost wages due to a medical disability is an example of _______.
A) direct medical care costs
B) direct nonmedical costs
C) indirect costs
D) deadweight loss
E) None of the above.
Answer: C
Q3) Rationality implies that people will always make the correct choice.
A)True
B)False
Answer: False
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Chapter 4: Health Care Systems and Institutions
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Q1) Fee-for-service reimbursement systems help reduce health care expenditures.
A)True
B)False
Q2) Switzerland's health care system can be best described as _______.
A) national health insurance
B) socialized health insurance
C) managed competition
D) public contracting
E) pluralistic
Q3) The two major types of public health insurance in the U.S. are _______,
A) Blue Cross and Blue Shield
B) Blue Shield and Medicaid
C) Blue Cross and Medicare
D) Medicare and Blue Shield
E) Medicare and Medicaid
Q4) Non-distribution constraints prevent not-for-profit organizations from distributing profits to employees, managers, or company directors.
A)True
B)False
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Chapter 5: The Demand for Medical Care
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Q1) Demand for most medical services in the U.S. has been found to be inelastic.
A)True
B)False
Q2) A _______ represents a fixed amount paid by the consumer that is independent of the market price or actual costs of medical care.
A) deductible
B) loading charge
C) coinsurance rate
D) claim
E) copayment
Q3) Insurance _______ the price for medical care, thereby _______ the demand for it.
A) increases; decreases
B) decreases; decreases
C) increases; increases
D) decreases; increases
E) None of the above
Q4) Larger deductible requirements decrease the risk of moral hazard.
A)True
B)False
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Chapter 6: The Demand for Medical Insurance: Traditional and Managed Care Coverage
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Q1) Consumer-driven healthcare attempts to _______ moral hazard costs by _______ out-of-pocket expenditures faced by consumers.
A) increase; decreasing
B) decrease; decreasing
C) increase; increasing
D) decrease; increasing
E) None of the above
Q2) An individual who is _______ would be indifferent to purchasing health insurance.
A) risk-averse
B) self-employed
C) unemployed
D) risk-neutral
E) risk-loving
Q3) Elimination of the tax-exempt status of employer-sponsored health insurance would most likely lead to a decrease in the purchase of health insurance.
A)True
B)False
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Page 8
Chapter 7: Medical Care Production and Costs
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Q1) _______ occur when the cost of producing two outputs is less than the sum of the costs incurred when producing each output individually.
A) Economies of scale
B) Economies of scope
C) Diseconomies of scale
D) Diseconomies of scope
E) None of the above
Q2) _______ reflect the alternatives given up by using resources to produce medical services.
A) Marginal costs
B) Fixed costs
C) Explicit costs
D) Implicit costs
E) Variable costs
Q3) Previously paid sunk costs do not factor into most decisions since they can't be recouped.
A)True
B)False
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Chapter 8: Structure, Conduct, Performance, and Market Analysis
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Q1) Collusion among firms is most likely to take place within which type of industry?
A) Perfect Competition
B) Monopolistic Competition
C) Oligopolies
D) Monopolies
E) None of the above
Q2) If the real hourly wage paid to physicians increase, the real hourly wage paid to nurses will _______.
A) increase
B) decrease
C) stay the same
D) increase only if the number of physicians increases
E) none of the above
Q3) Barriers to entry are not present in which type of industry?
A) Perfect Competition
B) Monopolistic Competition
C) Oligopolies
D) Monopolies
E) None of the above
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Chapter 9: Government, Health, and Medical Care
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Q1) Suppose a government decides to subsidize flu vaccinations in an attempt to correct a market failure. Without this government intervention, the flu vaccination would most likely be ______ due to the presence of _______.
A) over-consumed; negative externalities
B) under-consumed; positive externalities
C) over-consumed; positive externalities
D) under-consumed; negative externalities
E) none of the above
Q2) Penalties levied on consumers for the purchase of "Cadillac" health insurance plans are meant to correct for the positive externalities associated with these plans.
A)True
B)False
Q3) Flu vaccinations are an example of _______.
A) positive demand-side externality
B) negative supply-side externality
C) no externality
D) negative demand-side externality
E) positive supply-side externality
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Chapter 10: Government As Health Insurer
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Q1) The Resource-Based Relative Value Scale System might cause an oversupply of certain medical services if the fee is set too high.
A)True
B)False
Q2) If a physician is currently operating at full capacity, an increase in Medicare reimbursement rates could lead to decline in access for privately insured patients.
A)True
B)False
Q3) _______ is a prospective payment system used by Medicare to reimburse hospitals for the provision of medical care.
A) Resource-Based Relative Value Scale System
B) Fee-for-service
C) Diagnosis-Related Groups System
D) Doughnut Hole System
E) Capitation Payment System
Q4) At the age of 65, individuals are automatically enrolled in Medicare Part B. A)True
B)False
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Chapter 11: The Private Health Insurance Industry
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Q1) _______ occurs when high-risk individuals subscribe to an insured group of low-risk individuals.
A) Moral Hazard
B) Asymmetric Information
C) Rationality
D) Scale Economies
E) Adverse Selection
Q2) To maximize profits, a dominant insurance provider will set the price for insurance such that the marginal revenue of providing coverage is _______ of providing coverage.
A) greater than the marginal cost
B) less than the average total cost
C) equal to the marginal cost
D) equal to the average total cost
E) none of the above
Q3) Health insurance mandates may result in market inefficiencies if the marginal cost of additional coverage exceeds the marginal benefit received.
A)True
B)False
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Page 13
Chapter 12: The Physician Services Industry
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Q1) The _______ suggests that per capita variations in the use of medical care are due to variations in clinical opinions regarding the appropriate amount and type of medical care.
A) physician practice hypothesis
B) supplier-induced demand hypothesis
C) enthusiasm hypothesis
D) principal-agent hypothesis
E) small area variation hypothesis
Q2) Allowing physicians to patent and license practice strategies could help decrease price variations.
A)True
B)False
Q3) If all statutes limiting the roles of physician assistants were lifted, the level of competition in the physician services market would decrease.
A)True
B)False
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Chapter 13: The Hospital Services Industry
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Q1) According to the _______, new technology is most likely to be adopted by research and teaching hospitals first.
A) quantity maximization model
B) quality maximization model
C) managerial expense preference model
D) quality/quantity maximization model
E) utility maximization model
Q2) Most hospitals in the U.S. operate as for-profit firms.
A)True
B)False
Q3) Assume that there are 5 equally sized hospitals in a market area. If two of these hospitals decide to merge, what will be the increase in the Herfindahl-Hirschman index?
A) 2000
B) 800
C) 1600
D) 2800
E) 400
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Chapter 14: The Pharmaceutical Industry
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Q1) The U.S. government decreases competition within the pharmaceutical industry through the issuing of patents.
A)True
B)False
Q2) The FDA might delay the drug approval process to decrease the likelihood of a type 1 error.
A)True
B)False
Q3) Which of the following accounts for the largest share of expenditures on prescription drugs?
A) Private insurance
B) Medicare
C) Medicaid
D) Medigap
E) Out-of-pocket
Q4) Drug-utilization reviews are used by third-party payers to rein in costs.
A)True
B)False
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Page 16
Chapter 15: The Long-Term Care Industry
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Q1) Which of the following has been shown to discourage competition in the long-term care industry?
A) Certificates of need
B) Sunk costs
C) Scale economies
D) Predominance of Medicaid
E) None of the above
Q2) The market demand for medical services represents a _______, unlike the _______ for long-term care.
A) supplier-induced demand; derived demand
B) basic demand; derived demand
C) derived demand; basic demand
D) basic demand; supplier-induced demand
E) derived demand; supplier-induced demand
Q3) Scale economies allow long-term care facilities to substantially decrease costs with only slight quality reductions.
A)True
B)False
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Chapter 16: Health Insurance Reform
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Q1) An individual mandate system reins in cost through highly competitive medical insurance markets.
A)True
B)False
Q2) Which of the generic health plans would contain costs through highly competitive insurance markets?
A) Managed competition
B) National health insurance
C) Medical savings accounts
D) Individual mandates
E) Both a and d
Q3) A national health insurance plan would provide significant cost advantages through scale economies.
A)True
B)False
Q4) While the U.S. spends more per capita on medical care, it possesses the lowest infant mortality rate amongst developed countries.
A)True
B)False
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