Health Economics
Final Exam
Course Introduction
Health Economics explores the application of economic principles to the health care sector, examining how resources are allocated, health services are financed, and policies influence the efficiency and equity of health systems. The course covers topics such as the demand and supply of health care, health insurance markets, cost-effectiveness analysis, and the evaluation of health outcomes. Through theoretical frameworks and empirical evidence, students gain an understanding of challenges faced by health care systems worldwide, and analyze the impact of health policies on individuals and populations.
Recommended Textbook
Health Care Economics 7th Edition by Paul
J. Feldstein
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18 Chapters
357 Verified Questions
357 Flashcards
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Page 2
Chapter 1: An Introduction to the Economics of Medical Care
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Sample Questions
Q1) Which of the following will not increase the demand for medical services?
A)An increase in income
B)New cost-saving technology in MRI machines
C)An outbreak of the flu
D)An increase in the population
Answer: B
Q2) In the graph above,the opportunity cost in defense dollars associated with moving toward more medical expenditures is
A)Increasing
B)Decreasing
C)Constant
D)Increasing then decreasing
E)Decreasing the increasing
Answer: A
Q3) Demand curves are downward sloping because of
A)Increasing marginal cost
B)Diminishing marginal cost
C)Increasing marginal benefit
D)Diminishing marginal benefit
Answer: D
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Chapter 2: The Role of Government in Health and Medical Care
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Sample Questions
Q1) Which of the following transfers is most efficient?
A)$10 itunes gift card
B)$100 medical care tax credit
C)$100 in cash
D)$100 health insurance subsidy
Answer: C
Q2) When the marginal propensity to consume is less than 1, the
A)average propensity to consume is greater than 1.
B)average propensity to save is greater than 1.
C)marginal propensity to save is negative.
D)marginal propensity to save is positive.
Answer: D
Q3) Which of the following is an example of an externality in the cigarette market?
A)firsthand smoke
B)secondhand smoke
C)Increase in the price of tobacco
D)Increase in the price of a competitors' cigarettes
Answer: B
Q4) Graph the Marginal Private Cost (MPC)and the Marginal Private Benefit.
Answer: 11ea48be_8914_81ef_b057_a5da371a5ee7_TB2105_00
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Chapter 3: Health Policy and the Legislative Marketplace
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Sample Questions
Q1) Explain how medical associations take different political stances on other labor inputs that are either substitutes or complements to the members they represent.
Answer: Medical associations support the expansion of complements because as the number of these complements increase,the price of complements decreases.As the price of the complements decreases,it will cause demand to increase for the associations' members.On the other hand,the medical associations support restrictions to substitutes as these inputs are in direct competition with the members of the association and any expansion of this group would cause incomes to fall for all.
Q2) Explain why the AMA supports a requirement of employer sponsored health insurance,but not a public health insurance option?
Answer: A large public health insurance company can impose monopsony power and force medical providers to accept lower prices for services than those that can be negotiated with smaller private firms.
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Chapter 4: The Production of Health: the Impact of Medical
Services on Health
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Sample Questions
Q1) To allocate resources efficiently,one should consider
A)The relative size of each program
B)The marginal product of each program
C)The average product of each program
D)The level of need in each program
Q2) In the alcohol study by Carpenter and Dobkin,the increase in mortality caused by the 21-year-old age restriction on alcohol consumption primarily affects
A)Only new drinkers
B)Only experienced drinkers
C)Only heavy drinkers
D)Both a and b
E)Both a and c
Q3) According to Victor Fuchs' research on infant mortality,the reduction of infant mortality between 1900 and 1930 following events,except
A)Chlorination of water
B)Increased literacy
C)Decreased birthrate
D)Pasteurization of milk
E)Medical care
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Chapter 5: An Overview of the Medical Care Sector
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Q1) Which type of market is not present in the medical care sector?
A)Institutional
B)Management
C)Manpower
D)Educational
Q2) An increase in the demand for medical schools will
A)Increase the price of medical service
B)Increase the quantity of medical services
C)Both a and b
D)Neither a nor b
Q3) If the government would like to expand access to care,is it better to use a demand policy or a supply policy? Pay particular attention to the elasticity of each curve.
Q4) A decrease in the demand for physical therapy will lead to
A)A decrease in the wages of physical therapists
B)A decrease in the number of physical therapist students
C)A decrease in the price for physical therapy
D)All of the above
E)None of the above
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Chapter 6: The Demand for Medical Care
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Sample Questions
Q1) As co-insurance rates increase,patients become
A)More sensitive to changes in price,which leads to over-consumption
B)Less sensitive to changes in price,which leads to over-consumption
C)More sensitive to changes in price,which leads to under-consumption
D)Less sensitive to changes in price,which leads to under-consumption
Q2) Discuss the role of physicians on patients' demand for medical services.
Q3) Which of the following business strategies are used by health insurance companies to curb physician-induced demand?
A)Requiring prior authorization before administering a treatment/procedure
B)Providing physicians with financial incentives to reduce overall cost
C)Requiring patients to seek a second opinion for high-cost treatments/procedures
D)All of the above
E)None of the above
Q4) After the introduction of Medicare and Medicaid,the increase in medical expenditures can be explained by a
A)Less than 25% increase in prices
B)25% to 50% increase in prices
C)50% to 75% increase in prices
D)Greater than 75% increase in prices
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Chapter 7: The Demand for Health Insurance
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Sample Questions
Q1) Suppose there are two types of people in an insurance market: high and low risks.The high-risk person is sick 10% of the time and the low-risk person is sick 5% of the time.The probability that any individual is high risk is 40%.Upon getting sick,an individual loses $10,000 in medical expenses.What are the actuarially fair premiums for the types?
Q2) A public option in the health insurance market has been proposed as a remedy to the increasing cost of health care.Critics state that a public option requiring all citizens to purchase health insurance would decrease health insurance premiums on average by mitigating
A)The adverse selection problem
B)The moral hazard problem
C)A failure of the market for externalities
D)The existence of spillover benefits
Q3) Suppose the inverse demand for physician office visits is P = 1000 - 20Q.Now suppose an insurance policy provides a co-insurance rate of 50%.Graph the new demand function with health insurance.
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Chapter 8: The Supply of Medical Care: an Overview
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Sample Questions
Q1) The average fixed cost curve is
A)U shaped with output
B)Always increasing with output
C)Always decreasing with output
D)None of the above
Q2) Hospitals compete mainly in a _________ market.
A)Product market
B)Quality market
C)Geographic market
D)Price market
Q3) If the demand for hospital visits in a city are 10,000 and a typical physician office can accommodate 50 patients per day,the number of physician offices is A)2000
B)200
C)20
D)Cannot be determined
Q4) Assume that the marginal productivity of an RN is 10 patients and the marginal productivity of an LPN is 2.5 patients.The wage of an LPN is $20 per hour.Find the equilibrium wage for RNs.
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Chapter 9: Market Competition in Medical Care
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Sample Questions
Q1) __________ place the incentive to reduce cost on the __________
A)PPO;provider
B)POS;provider
C)FFS;provider
D)PPO;consumer
Q2) Which of the following reduce price competition?
A)Hospital consolidation
B)Price regulation
C)State regulation
D)None of the above
E)All of the above
Q3) Which reimbursement mechanisms encourage over-servicing by doctors?
A)Fee For Service
B)Capitation
C)Neither a nor b
D)Both a and b
Q4) Explain how the lack of information to patients about plans and physicians leads to more market distortions.
Q5) What does the Rand HMO experiment tell us about the effect of HMOs on hospitalized utilization?
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Chapter 10: The Market for Health Insurance: Its
Performance and Structure
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Sample Questions
Q1) Health insurance enrollees are less likely to change their health insurance carrier when
A)Administrative costs are high
B)Administrative costs are low
C)Switching costs are high
D)Switching costs are low
Q2) Do high concentration ratios have an effect on input prices?
Q3) Commercial insurers who use a(n)_____________ rating can steal ________ risk individuals from Blue Cross and Blue Shield and reduce cost.
A)Community;high
B)Community;low
C)Experience;high
D)Experience;low
Q4) Premiums based on experience ratings
A)Are uniform across age groups.
B)Are based on the loss experience of the insured.
C)Vary depending on the income of the insured.
D)Are illegal in most states in the United States
E)Are only used in property-casualty insurance underwriting.
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Q5) Explain why insurance companies may be hesitant to increase relative premiums.
Chapter 11: The Physician Services Market
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Sample Questions
Q1) What is supplier-induced demand and explain its affects on medical prices and services?
Q2) A specific opportunity cost of attending medical school is:
A)The tuition fee
B)The foregone income
C)The sleep deprivation and fatigue during arduous internships
D)All of the above
Q3) The rate of return on training for physicians in the United States,when compared to that for most other educational groups (college graduates,PhDs)
A)Lower
B)Similar
C)A bit higher
D)A lot higher
Q4) Define defensive medicine and describe what Baicker,Fisher,and Chandra found as the cost of defensive medicine.
Q5) Explain the effects of advertising on physician services.
Q6) What are the reasons why both the size of medical groups and their numbers have Explain.
Q7) How did physicians accepting Medicare assignments cause price discrimination?
Page 13
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Chapter 12: The Market for Hospital Services
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Q1) Studies have shown that nonprofit hospitals in the United States are ________ than for-profit hospitals.
A)Less efficient
B)More efficient
C)More efficient and higher quality
D)Not very different in efficiency
Q2) Explain how Certificates of Need (CON)may be anticompetitive.
Q3) What are the advantages of using the Herfindahl-Hirschman Index versus a concentration ratio?
Q4) The quality of hospitals used by HMOs is on average
A)Greater than non-HMO hospitals
B)Equal to non-HMO hospitals
C)Less than non-HMO hospitals
Q5) Over the past 20 years,the ability of hospitals to cost-shift has
A)Increased
B)Decreased
C)Remained unchanged
Q6) What are the determinants of a geographic market?
Q7) Explain why a hospital can be considered a multiproduct firm.
Page 14
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Chapter 13: The Pharmaceutical Industry
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Sample Questions
Q1) What is the rationale for FDA regulation of drugs?
A)To protect the consumer from dangerous drugs
B)To remedy the lack of information about new drugs among physicians
C)Both a and b
D)Neither a nor b
Q2) Most pharmaceutical drug discoveries fail to lead to a marketable drug due to
A)Abandonment before reaching Phase III trials
B)Abandonment due to failure during Phase III trials
C)Abandonment for economic reasons despite success during Phase III trials
Q3) Describe methods used by brand-name pharmaceutical companies to delay the entry of generic drugs.
Q4) Which of the following are types of prescription drug advertising?
A)Direct-to-Consumer Advertising (DTCA)
B)Detailing
C)Free samples
D)All of the above
Q5) For pharmaceutical drugs,R&D expenditures account for
A)Over two-thirds of expenses
B)Between one-third and two-thirds of total expenses
C)Less than one-third of expenses
Page 15
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Chapter 14: Health Manpower Shortages and Surpluses:
Definitions, measurement, and Policies
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Sample Questions
Q1) Suppose the demand for labor is w = 300 - 2Q and the supply of labor is w = Q.If a price floor is set at $50,then the equilibrium
A)Wage is $100 and quantity is 100
B)Wage is $100 and quantity is 50
C)Wage is $50 and quantity is 100
D)Wage is $50 and quantity is 50
Q2) The number of physicians per 100,000 has risen between 1980 to 2007 by
A)More than 50%
B)Between 50% and 25%
C)Less than 25%
Q3) If the marginal product per dollar of physicians is lower than practical nurses,we should:
A)hire more physicians,because they are more productive
B)hire more practical nurses,because their marginal productivity per dollar is higher
C)hire more of each,because they have positive marginal productivity per dollar
D)hire fewer of each to lower costs
Q4) What are the potential pitfalls of using the ratio technique to determine shortages/surpluses?
Page 16
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Chapter 15: The Market for Physician Manpower
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Q1) Which of the following is not a barrier to entry into the physician profession?
A)High membership fees into medical societies
B)Medical school accreditation
C)Longer residency programs
D)State Licensing
Q2) If a physician can charge every patient a different price according to their willingness to pay,this is called
A)First-degree price discrimination
B)Second-degree price discrimination
C)Third-degree price discrimination
D)Fourth-degree price discrimination
Q3) Describe how physicians can use price-discrimination to serve both high- and low-income patients.
Q4) Which action gave physicians a financial incentive to provide medical services and tests believed to result in better outcomes?
A)Flexner Report
B)Removal of antitrust protection
C)Gies Report
D)P4P
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Chapter 16: The Market for Medical Education: Equity and Efficiency
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Q1) Large government subsidies allow medical schools to set tuition
A)Higher than the competitive price
B)Lower than the competitive price but above cost
C)Lower than the competitive price and below cost
D)None of the above
Q2) An increase in the number of years needed to finish medical school
A)Shifts the demand for medical school to the left and decreases the number of physicians
B)Shifts the demand for medical school to the right and decreases the number of physicians
C)Leads to a decrease in quantity demanded
D)Leads to an increase in quantity demanded
Q3) What are some of the concerns associated with medical school tuition that reflect the true cost of a medical education?
Q4) What would be an economic justification for subsidizing a medical education?
Q5) The use of fluorine in public tap water to reduce cavities is an example of a
A)Negative externality
B)Positive externality
C)Public good
D)Private good
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Chapter 17: The Market for Registered Nurses
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Q1) An increase in the minimum required nurse ratio will cause
A)An increase in the wage of nurses and the supply curve to increase
B)An increase in the wage of nurses and the supply curve to decrease
C)A decrease in the wage of nurses and the demand curve to increase
D)An increase in both wages and demand for nurses
Q2) Explain why the ANA would support educational subsidies to attend nursing school.
Q3) The education requirements for a nurse are
A)Three-year nursing school program
B)Two-year associate program
C)Four-year baccalaureate program
D)All of the above
Q4) Explain why prior to 1966,the nursing market was experiencing a static shortage.
Q5) The vacancy rate of nurses within hospitals was highest during
A)1958
B)1962
C)1967
D)1968
Q6) What are the benefits and cost of a comparable worth-based wage determination system.
Page 19
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Chapter 18: National Health Insurance: an Approach to the
Redistribution of Medical Care
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Q1) Explain how a comparative effectiveness board could reduce health care cost.
Q2) Equal treatment for equal needs can be achieved by
A)Income dependent subsidies
B)Equal subsidies regardless of income
C)Free health care
D)None of the above
Q3) What are the benefits and costs of an individual health insurance mandate.
Q4) ____________ makes health insurance portable by allowing new employees to forego health screening if they had health insurance at their previous job.
A)HIPAA
B)CHIP
C)HSA
D)PPACA
Q5) What are the problems with an employer health insurance mandate?
Q6) Medicare expenditures can be reduced by
A)Reducing payments to the suppliers of Medicare services
B)Increasing the Medicare payroll tax
C)Making Medicare a defined contribution program
D)All of the above
Q7) Why is deficit financing politically appealing? Page 20
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