Deck 3: Analyzing Medical Care Markets

Question 1

Which of the following would likely lead to the greatest improvement in health status of the population in the United States?

A)Higher per capita incomes.
B)More spending on public health, such as improved water supply and sanitation.
C)More medical care spending overall.
D)Improved lifestyles, including reductions in the use of tobacco, alcohol, and drugs.
E)More rural hospitals.

Answer 1

Improved lifestyles, including reductions in the use of tobacco, alcohol, and drugs.

Question 2

Approximately what percentage of total health care spending goes toward hospital care?

A)One-tenth.
B)One-fifth.
C)One-fourth.
D)One-third.
E)One-half.

Answer 2

One-third.

Question 3

What measures would likely lower infant mortality rates in the United States?

A)Prenatal care programs in low-income neighborhoods.
B)Reduced drug use among expectant mothers.
C)Better nutrition.
D)Delaying childbearing beyond the teen-age years.
E)All of the above.

Answer 3

All of the above.

Question 4

A person with AIDS applies for health insurance but hides his health status from the insurance company.What is the likely result for the insurance company?

A)Principle-agent problem.
B)Rational ignorance.
C)Externalities.
D)Adverse selection.
E)The substitution effect.

Question 5

Which of the following results from patients having better information about their health status than insurers?

A)Principle-agent problem.
B)Rational ignorance.
C)Externalities.
D)Adverse selection.
E)The substitution effect.

Question 6

If a hospital is experiencing economies of scale,

A)its average cost curve is positively sloped as output increases.
B)its average cost curve is negatively sloped as output increases.
C)it should reduce its output level to lower costs.
D)quality is falling as output is rising.
E)both b and c are true.

Question 7

The optimal level of output may be defined as that level of output where

A)average benefit exceeds average cost by the greatest amount.
B)total benefit equals total cost.
C)marginal benefit exceeds marginal cost by the greatest amount.
D)the marginal benefit of the last unit purchased equals its marginal cost.
E)it is impossible to define optimal in any meaningful way.

Question 8

Which of the following might cause a market to produce a quantity that is less than optimal?

A)A price ceiling above the market equilibrium price.
B)Market control by a monopolist.
C)A subsidy to low-income consumers.
D)None of the above.

Question 9

In which of the following countries would an increase in per capita income likely result in the most improvement to health status of the population? (2006 per capita incomes in PPP dollars shown in parentheses.)

A)Mexico ($13,383)
B)New Zealand ($26,068)
C)Germany ($32,900)
D)United Kingdom ($34,084)
E)United States ($44,639)

Question 10

The concept deadweight loss refers to

A)lost profit that results from government action.
B)lost revenue because competition forces prices down.
C)lost surplus resulting from prices being set above competitive equilibrium.
D)lost utility due to goods costing more that consumers can afford.

Question 11

Inoculation programs against certain diseases such as small pox, polio, and whooping cough create

A) public goods.
B) positive externalities in consumption.
C) nonrival goods.
D) nonexcludable goods.
E) external costs to society equal to the costs of the program.

Question 12

Which of the following is not a result of moral hazard?

A)Deductibles and coinsurance.
B)Increased medical care spending.
C)Increased likelihood of visiting a physician.
D)Higher health insurance premiums.
E)All of the above result from moral hazard.

Question 13

Under which of the following circumstances is the principal-agent problem likely to be most serious.

A)Between general practitioners and patients.
B)Between surgeons and patients.
C)Between hospitals and nurses.
D)Between dentists and physicians.
E)Between physicians and lawyers.

Question 14

Which of the following results from providers having more information about treatment alternatives than their patients?

A)Principle-agent problem.
B)Rational ignorance.
C)Externalities.
D)Adverse selection.
E)The substitution effect.

Question 15

When a physician knows more about alternative treatments than her patients, we say that _______ exists.

A)rational ignorance.
B)perfect information.
C)asymmetric information.
D)moral hazard.
E)adverse selection.

Question 16

Approximately what percentage of total health care spending goes toward physicians' services?

A)One-tenth.
B)One-fifth.
C)One-fourth.
D)One-third.
E)One-half.

Question 17

The government agency that controls the development and availability of new medical discoveries, including pharmaceutical drugs is

A)the Health Care Financing Administration.
B)the Food and Drug Administration.
C)the Centers for Disease Control.
D)the National Institutes for Health.
E)the Federal Emergency Medical Administration.

Question 18

Between 1960 and 1999, out-of-pocket spending on health care changed from almost _____ percent of total spending to less than _____ percent of total spending.

A)10, 30.
B)20, 15.
C)30, 10.
D)50, 15.
E)60, 25.