Deck 9: The Health Care Market

Question 1

The government can address __________ by providing universal health insurance coverage and charging uniform premiums.

A)expected utility
B)asymmetric information
C)commodity egalitarianism
D)adverse selection

Answer 1

adverse selection

Question 2

In Figure 9.3,Panel B,$40,000 for certain is as desirable as $47,000 with risk.

Answer 2

True

Question 3

Most private insurance is provided by

A)employers as a benefit to their employees.
B)the federal government.
C)HMOs.
D)the Office of Health Insurance.

Answer 3

employers as a benefit to their employees.

Question 4

The current percentage of Americans over the age of 65 is

A)18.2%.
B)19.0%.
C)12.6%.
D)10.5%.

Question 5

Most private medical insurance is provided through employers as a benefit to their employees.

Question 6

Paying money in order to guarantee a certain level of compensation should an adverse event occur is

A)risk aversion.
B)risk smoothing.
C)risk pooling.
D)risk rating.

Question 7

What percentage of African Americans are uninsured?

A)80
B)3
C)37
D)21

Question 8

When the average buyer of an insurance policy is likely to have higher risk than others in his class,this is known as

A)adverse selection.
B)moral hazard.
C)asymmetric information.
D)an HMO.

Question 9

Marginal benefit and marginal cost must _______ to avoid a deadweight loss.

A)equal
B)never equal
C)decrease at an increasing rate
D)increase at an increasing rate

Question 10

In Figure 9.2,the value of insurance is $7,000.

Question 11

When people behave in ways that involve increased risk because they have insurance,this is known as

A)adverse selection.
B)moral hazard.
C)asymmetric information.
D)a HMO.

Question 12

Health care markets may be inefficient because of

A)poor information.
B)adverse selection.
C)moral hazard.
D)all of the above.

Question 13

Which country had the highest per capita expenditures on health care in 2004?

A)Australia
B)Japan
C)Norway
D)United States

Question 14

Expected values

A)are calculated as the average value.
B)are calculated over all possible outcomes.
C)are weighted by the probability of an even occurring.
D)all of the above.

Question 15

Which one of these conditions is not a part of asymmetric information?

A)parties are engaged in and economic transaction.
B)information is not uniform.
C)the government usually intercedes to fix the problem.
D)all of the above.

Question 16

In 2007,the percentage of health care expenditures paid out-of-pocket was

A)6.9.
B)8.3.
C)12.
D)1.5.

Question 17

At any given time in the US,16 percent of the population lacks health insurance.

Question 18

A third-party payment is

A)made by three people.
B)a payment that requires three signatures.
C)is made by someone other than the consumer.
D)is not used in the US health system.

Question 19

Pooling individuals allow insurance companies to _______ risk from a societal point of view.

A)increase
B)decrease
C)do nothing regarding
D)none of the above

Question 20

Health care costs have been increasing dramatically in the US.

Question 21

In Table 9.2 in your textbook,Emily will loose no income if she becomes sick.

Question 22

One reason for the recent increases in health care costs is the aging of the American population.

Question 23

A co-payment and coinsurance are the same thing.

Question 24

Suppose there are two drivers,Jermaine and Janet.Jermaine is not a very safe driver.In fact,there is a 7.5% chance that he will have an accident within the next year.Janet is a relatively safe driver.Her chances of having an accident in the next year are only 1%.If Jermaine is involved in an accident,he will cost the insurance company $1,000,000.If Janet is involved in an accident,she will only cost the company $500,000.What is the expected pay-out that the company can expect from insuring these two?

Question 25

Suppose that the demand for medical services can be characterized by the equation X = 500 - P/3.Suppose further that the supply of health services can be characterized by the equation X = P - 100.
(a)What is the equilibrium quantity and price in the market for health services?
(b)In an effort to make health services more affordable,the government restricts the price of health services to be no greater than $250.What will happen to the quantity of health services in the market?

Question 26

President Obama has suggested some form or universal health coverage for all Americans.How do you feel about this?

Question 27

What effect would a "price cap" have on medical services?

Question 28

Since nearly a third of all people between the ages of 18 and 24 are uninsured,does it make sense to impose a surcharge for medical services to this cohort?

Question 29

We have read that the uninsured and the insured behave differently in regard to medical services.Suppose that the insured have a demand curve that can be written as Q = 100 - P,where Q is the quantity of medical services and P is the price.Suppose further that the uninsured have a demand curve that can be written as Q = 100 - 2P.
(a)At a price of $10 of medical services,how much will each demand?
(b)At a quantity of 50 units,how much will the price be for the insured and uninsured?

Question 30

We have read in this chapter that people with insurance may be more likely to engage in risky behavior because they are insured.Does it make sense then that there should be an "insurance tax" on people that engage in these types of activities?