Health Care Economics Final Exam
Course Introduction
Health Care Economics explores the application of economic principles and analysis to the organization, delivery, and financing of health care services. The course examines topics such as supply and demand for health care, the behavior of health care providers and consumers, health insurance markets, government intervention, and the impact of economic incentives on health outcomes and resource allocation. Students will develop a critical understanding of current issues facing the health care sector, including cost containment, access to care, quality of services, and the economic evaluation of health care technologies and policies.
Recommended Textbook Health Economics 6th Edition by Rexford E. Santerre
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16 Chapters
240 Verified Questions
240 Flashcards
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Page 2
Chapter 1: Introduction
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Sample Questions
Q1) The components of the three-legged stool of medical care are _______.
A) costs, access, efficiency
B) costs, equity, access
C) access, equity, efficiency
D) efficiency, costs, quality
E) costs, access, quality
Answer: E
Q2) 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
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Chapter 2: Health and Medical Care: an Economic Perspective
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Sample Questions
Q1) 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
Q2) _______ has been credited as the leading cause of decreases in child mortality during the early twentieth century in the U.S.
A) The polio vaccine
B) Improvements in public education
C) Improvements in water quality
D) Medicaid
E) The improving macroeconomy
Answer: C
Q3) Process quality refers to the physical and human resources of the medical care organization.
A)True
B)False
Answer: False
Page 4
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Chapter 3: Cost and Benefit Analysis
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Sample Questions
Q1) Discounting involves _______ by (1 + r)<sup>t</sup> to obtain the _______ .
A) dividing the present value; willingness to pay
B) multiplying the future value; present value
C) multiplying the present value; willingness to pay
D) dividing the future value; present value
E) dividing the future value; willingness to pay
Answer: D
Q2) Failure to achieve the maximum total net societal benefit (TNSB) results in some amount of _______.
A) deadweight loss
B) negative TNSB
C) increasing opportunity costs
D) unnecessary direct costs
E) diminishing marginal productivity
Answer: A
Q3) Cost-effectiveness analysis is useful in deciding if public funds should be spent on military personnel or public health initiatives.
A)True
B)False
Answer: False
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Chapter 4: Health Care Systems and Institutions
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Sample Questions
Q1) Medical care providers in the U.S. are reimbursed through the use of _______.
A) fixed payment systems
B) variable payment systems
C) out-of-pocket fees
D) All of the above
E) both a and c
Q2) Which of the following refers to a situation where the health insurer reimburses 100% of the amount spent on medical services?
A) Patient Protection and Affordable Care Act of 2010
B) Managed care
C) Coinsurance
D) First dollar coverage
E) both c and d
Q3) 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
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Page 6
Chapter 5: The Demand for Medical Care
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Sample Questions
Q1) As consumers purchase more medical care, the marginal utility per dollar spent on medical care increases.
A)True
B)False
Q2) Consumer demand for medical care is considered a _______ demand, as it depends on the consumer's demand for good health.
A) absolute
B) derived
C) relative
D) supplemental
E) supply-side
Q3) When will the marginal utility per dollar spent on medical care equal the marginal utility per dollar spent on entertainment for a consumer?
A) This will only occur when the consumer becomes ill.
B) This will only occur when the consumer is healthy.
C) This will only occur if the consumer seeks to maximize utility.
D) This will only occur if the consumer does not enjoy most forms of entertainment.
E) This will never occur.
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Chapter 6: The Demand for Medical Insurance: Traditional and Managed Care Coverage
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Sample Questions
Q1) If Sarah has an income of $50,000 when healthy, and faces a probability of 0.15 of losing $10,000 of this due to an illness, what is her expected income?
A) $17,500
B) $40,000
C) $48,500
D) $44,000
E) $16,000
Q2) Reduced coinsurance rates are likely to _______ moral hazard costs and _______ the risk exposure of the consumer.
A) increases; decreases
B) decreases; decreases
C) increases; increases
D) decreases; increases
E) None of the above
Q3) Individuals with higher annual incomes possess a greater incentive to purchase more comprehensive health insurance coverage.
A)True
B)False
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Chapter 7: Medical Care Production and Costs
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Sample Questions
Q1) If the average product of dental assistants is _______, then the marginal product of that labor must be _______ its average product.
A) increasing; less than B) decreasing; equal to C) decreasing; less than D) increasing; equal to E) decreasing; greater than
Q2) Which of the following best explains why production might increase at a decreasing rate with the addition of a variable input?
A) Increasing marginal opportunity costs
B) Increasing marginal productivity of labor
C) Diminishing marginal productivity of labor
D) Advancements in technology
E) Diminishing marginal opportunity costs
Q3) Short-run average variable costs decrease initially, but then begin to rise due to diminishing marginal productivity of labor.
A)True
B)False
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Chapter 8: Structure, Conduct, Performance, and Market Analysis
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Sample Questions
Q1) Suppose that the inverse market demand for a new vaccine is P = 21,000 - 5Q, and the marginal cost is $10 per vaccine. Assuming that the manufacturer is profit-maximizing, what will be the market price of this new vaccine?
A) 15,000
B) 17,250
C) 15,750
D) 14,000
E) 13,500
Q2) 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
Q3) In the long-run, economic profits will be zero in monopolistic competition.
A)True
B)False
Q4) Collusion is most likely to occur within monopolistic competition.
A)True
B)False
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Chapter 9: Government, Health, and Medical Care
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Sample Questions
Q1) Medicare and Medicaid are both demand-side subsidies.
A)True
B)False
Q2) 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
Q3) Government funding of medical schools is an example of a supply-side subsidy.
A)True
B)False
Q4) 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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Sample Questions
Q1) Medicare _______ covers hospital inpatient services, while _______ covers prescription drug benefits.
A) Part A; Part B
B) Part B; Part D
C) Part B; Part A
D) Part C; Part B
E) Part A; Part D
Q2) The majority of financing for Medicaid programs comes from _______.
A) the federal government
B) state governments
C) individual premiums
D) charitable care
E) none of the above
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
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Chapter 11: The Private Health Insurance Industry
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Sample Questions
Q1) _______ exist when the average total cost of providing insurance coverage decreases as a firm provides coverage for larger groups of people.
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) Third-party payments provide incentives for the adoption of new technologies that may carry low benefits with high costs.
A)True
B)False
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Page 13
Chapter 12: The Physician Services Industry
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Sample Questions
Q1) Traditional fee-for-service payment mechanisms provide incentives to over utilize medical care.
A)True
B)False
Q2) What are the two primary goals of the malpractice system?
A) Reduce the number of claims and deter negligence
B) Compensate victims and deter negligence
C) Reduce the number of claims and limit the size of awards
D) Increase the number of claims and compensate victims
E) none of the above
Q3) Over the past thirty years, the absolute number of active primary care physicians has _______ while the proportion of active primary care physicians has _______.
A) decreased; decreased
B) decreased; increased
C) increased; remained stable
D) increased; increased
E) increased; decreased
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Chapter 13: The Hospital Services Industry
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Sample Questions
Q1) 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
Q2) Which of the following hospital product characteristics has been shown to strongly affect consumer choice?
A) Staff
B) Physical facilities
C) Convenience
D) Experience
E) All of the above
Q3) Continued hospital consolidations have led to diminished market concentration in most metropolitan market areas.
A)True
B)False
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Chapter 14: The Pharmaceutical Industry
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Sample Questions
Q1) The FDA tends to focus more on reducing _______ errors since the victims are _______ identifiable than those from _______ errors.
A) type 1; less; type 2
B) type 2; more; type 1
C) type 2; less; type 1
D) type 1; more; type 2
E) None of the above
Q2) Drug-utilization reviews are used by third-party payers to rein in costs.
A)True
B)False
Q3) _______ advertising is supported by evidence showing that _______ detailed advertising of older products tends to be targeted at younger physicians.
A) Informative; more
B) Persuasive; less
C) Informative; less
D) Persuasive; more
E) both a and d
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Chapter 15: The Long-Term Care Industry
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Sample Questions
Q1) Prospective payment systems raise costs, improve quality, and result in more severe patient case-mixes.
A)True
B)False
Q2) Which of the following are reasons why larger amounts of the population fail to purchase long-term care insurance?
A) Adverse selection
B) Moral hazard
C) Intertemporal risk
D) Both a and b
E) All of the above
Q3) 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
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Chapter 16: Health Insurance Reform
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Sample Questions
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) _______ spends more per capita on medical care than all other developed countries.
A) The United Kingdom
B) Canada
C) The United States
D) Switzerland
E) Germany
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