Public Health Economics Study Guide
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Course Introduction
Public Health Economics explores the principles and methods of economic analysis as applied to public health issues and policy. The course examines how resources are allocated in health systems, the impact of economic factors on population health, and the evaluation of public health programs from a cost-effectiveness and cost-benefit perspective. Topics include health care financing, economic evaluation methods, demand and supply of health services, and the role of government and market forces in shaping public health outcomes. Students learn to assess the economic dimensions of disease prevention, health promotion, and interventions, ultimately developing the skills to inform evidence-based public health decisions.
Recommended Textbook Health Economics 6th Edition by Rexford
E. Santerre
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Chapter 1: Introduction
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Q1) 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
Q2) The U.S. market system is best described as a _______.
A) Perfect egalitarian system.
B) Pure market system.
C) Dictatorship.
D) Mixed distribution system.
E) More than one of the above statements is true.
Answer: D
Q3) Opportunity costs only occur when there is government involvement in markets such as health care.
A)True
B)False
Answer: False
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Page 3
Chapter 2: Health and Medical Care: an Economic Perspective
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Q1) _______ 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
Q2) The reduction in the number of reported polio cases was due largely to government health programs.
A)True
B)False
Answer: False
Q3) 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
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Chapter 3: Cost and Benefit Analysis
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Q1) 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
Q2) The _______ equates the value of a life to the market value of the output produced by an individual during his / her expected lifetime.
A) willingness-to-pay approach
B) cost-benefit approach
C) cost-effectiveness approach
D) human capital approach
E) cost-utility approach
Answer: D
Q3) Cost-utility analysis assumes that life-years added due to a medical intervention are homogeneous.
A)True
B)False
Answer: False
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Chapter 4: Health Care Systems and Institutions
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Q1) Increased consumer copayment requirements may help to reduce health care expenditures.
A)True
B)False
Q2) Fee-for-service reimbursement systems help reduce health care expenditures.
A)True
B)False
Q3) A variable payment reimbursement system with low out-of-pocket expenses carries a _______ of large amounts of medical services.
A) High likelihood
B) Moderate likelihood
C) Low likelihood
D) Very low likelihood
E) None of the above.
Q4) The purchase of insurance eliminates the risk of financial loss for all parties.
A)True
B)False
Q5) The majority of U.S. hospitals operate as non-profit organizations.
A)True
B)False
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Chapter 5: The Demand for Medical Care
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Q1) The _______ refers to how many more or fewer people buy a product when its price changes.
A) intensive margin
B) extensive margin
C) nominal demand
D) effective demand
E) fuzzy demand
Q2) Larger deductible requirements decrease the risk of moral hazard.
A)True
B)False
Q3) Time costs of acquiring medical care are considered _______.
A) direct non-medical costs
B) direct medical costs
C) opportunity costs
D) both a and b
E) both a and c
Q4) A negative income elasticity of demand for out-patient services would imply that it is an inferior good.
A)True
B)False
Page 7
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Chapter 6: The Demand for Medical Insurance: Traditional and Managed Care Coverage
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Q1) An increase in income tax rates _______ the opportunity cost of purchasing employer-sponsored health insurance.
A) increases
B) decreases C) does not affect
D) eliminates E) transfers
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) Individuals with higher annual incomes possess a greater incentive to purchase more comprehensive health insurance coverage.
A)True
B)False
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Page 8
Chapter 7: Medical Care Production and Costs
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Q1) The _______ of nurses is represented as the total amount of medical services produced divided by the total amount of nurse-labor.
A) marginal product
B) marginal cost
C) average product
D) opportunity cost
E) none of the above
Q2) If the marginal product is greater than the average product of physicians, then the average product of physicians must be increasing.
A)True
B)False
Q3) The _______ of nurses is represented as the change in medical services provided by an additional unit of nurse-labor.
A) marginal product
B) marginal cost
C) average product
D) opportunity cost
E) none of the above
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Chapter 8: Structure, Conduct, Performance, and Market Analysis
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Q1) 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
Q2) If a large number of nurses chose to leave the profession in pursuit of alternative careers, what would be the likely impact on the market?
A) permanent surplus
B) temporary shortage
C) temporary surplus
D) permanent shortage
E) none of the above
Q3) When the demand for medical care _______, the real hourly wage for physicians should _______.
A) increases; increase
B) decreases; increase
C) increases; stay the same
D) increases; decrease
E) decreases; stay the same
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Chapter 9: Government, Health, and Medical Care
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Q1) Government funding of medical schools is an example of a supply-side subsidy.
A)True
B)False
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
Q4) Public goods are considered to be both _______ and _______.
A) rival; excludable
B) rival; costly
C) non-rival; excludable
D) excludable; costly
E) non-rival; non-excludable
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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) Which of the following is a key difference between Medicare and Medicaid?
A) eligibility requirements
B) financing methods
C) reimbursement methods
D) benefits offered
E) all of the above
Q3) 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
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) Scale economies may serve as a barrier to entry in the private health insurance market by mandating a tiered benefit system.
A)True
B)False
Q2) Health insurance mandates may result in market inefficiencies if the marginal cost of additional coverage exceeds the marginal benefit received.
A)True
B)False
Q3) _______ 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
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Chapter 12: The Physician Services Industry
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Q1) 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
Q2) _______ refers to the exploitation of asymmetric information to increase demand for physician services.
A) Physician inflation rate
B) Supplier-induced demand
C) Fee-for-service
D) Market equilibrium
E) none of the above
Q3) Which of the following exemplifies the principal-agent theory within medical care?
A) The doctor-patient relationship
B) The doctor-payer relationship
C) The patient-payer relationship
D) Both a and c
E) All of the above
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Chapter 13: The Hospital Services Industry
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Q1) Third-party payers representing a _______ market share have _______ negotiation power to obtain lower prices for hospital services.
A) small; greater B) small; reduced C) large; reduced D) large; greater E) both b and d
Q2) Most hospitals in the U.S. operate as for-profit firms.
A)True
B)False
Q3) The managerial expertise model helps to explain why executives of non-profit hospitals may be overcompensated.
A)True
B)False
Q4) Certificates of need promote price competition amongst hospitals.
A)True
B)False
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Chapter 14: The Pharmaceutical Industry
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Q1) Which of the following serves as a barrier to entry in the pharmaceutical industry?
A) Government patents
B) Certificates of need
C) Brand-loyalty advantage
D) Both a and c
E) All of the above
Q2) Which of the following would explain why large firms possess a greater incentive to engage in research and development of new drugs than small firms do?
A) Resource capability
B) Risk absorption
C) Research economies
D) All of the above
E) None of the above
Q3) The FDA might delay the drug approval process to decrease the likelihood of a type 1 error.
A)True
B)False
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Chapter 15: The Long-Term Care Industry
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Q1) The market demand for long-term care represents a derived demand.
A)True
B)False
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) Which of the following best describes a typical nursing home?
A) For-profit ownership with 200 beds
B) Non-profit ownership with 50 beds
C) For-profit ownership with 100 beds
D) For-profit ownership with 50 beds
E) Non-profit ownership with 100 beds
Q4) Prospective payment systems raise costs, improve quality, and result in more severe patient case-mixes.
A)True
B)False
Page 17
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Chapter 16: Health Insurance Reform
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Q1) Evidence suggests that medical care spending produces positive net benefits _______, but produces negligible net benefits _______.
A) on average; at the margin
B) at the margin; on the flat-of-the-curve
C) on the flat-of-the-curve; on average
D) at the margin; on average
E) on the flat-of-the-curve; at the margin
Q2) Which of the generic health plans would best eliminate the problem of moral hazard?
A) Managed competition
B) National health insurance
C) Medical savings accounts
D) Individual mandates
E) Both a and c
Q3) A primary benefit of mandated health insurance is that employees don't incur any additional cost.
A)True
B)False
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