Deck 14: Economic Theories

Question 1

Why would economics as a science cease to exist without the concept of scarcity?

A) Consumers and producers would no longer have to make the trade-offs between alternatives that create the economic problem.
B) Producers would be unable to maximize their profits because consumers would hold all of the economic power.
C) Markets would cease to exist because there would no longer be a distinction between consumers and producers.
D) Non-market institutions would take over the role formerly held by producers and be governed by interests unrelated to profit.

Answer 1

A

Question 2

Why are uncertainties related to disease incidence and treatment efficacy of particular concern to health care economists?

A) Uncertainties open the door to government intervention, making it impossible to apply standard economic principles to health care.
B) Uncertainties generate asymmetrical information and data about health care that make economic analysis impossible.
C) Uncertainties lead to inefficiencies in resource allocation that must be compensated for by non-market institutions.
D) Uncertainties render the competitive forces model insufficient to regulate rising health care costs.

Answer 2

C

Question 3

Which concept is common to both classical economics and social exchange theory?

A) Human behavior is assumed to be rational.
B) Producers are assumed to seek maximum profits.
C) Supply and demand are assumed to function independently.
D) Consumers are assumed to have perfect information available when making decisions.

Answer 3

A

Question 4

Which statement about markets, consumer and producer behavior in markets, and market theory is false?

A) Market consumers attempt to maximize utility based on preference and price.
B) Market theory states that the market achieves competitive equilibrium based on allocative efficiency.
C) Market competition is the mechanism for setting supply and demand.
D) Market producers attempt to maximize profits based on their mix of input and output.

Question 5

Which scenario best exemplifies the concept of opportunity cost?

A) Arthur has been offered a promotion to department manager. The promotion means more hours at work and more responsibilities, but includes only a title change and not an increase in salary.
B) Louisa has a small bakery that generates a modest profit for her. She knows if she pools her profits for two years she will have enough money to expand her bakery and increase her profits.
C) Bernardo has been offered a chance to invest in a startup company that has the potential to generate a great deal of profit if it is successful. Since the cost to invest is very high, he must decide if the potential profit is worth the risk.
D) Beth has enough money to either buy her son a new pair of jeans before winter or get him vaccinated against the flu. She knows that once she chooses one alternative, she will be unable to afford the other.

Question 6

According to the demand curve, if the price of an item goes down, what happens to the demand for that item?

A) It goes down.
B) It goes up.
C) It remains the same.
D) It fluctuates unpredictably.

Question 7

Noah just received his allowance and goes to the grocery store to buy candy with it. He purchases four candy bars and heads over to the park to eat them. If the law of marginal utility is applied to Noah's consumption of the candy bars, which assumption is probably true?

A) He will enjoy each candy bar a little bit less than the previous candy bar.
B) He will desire additional candy bars a little bit more with each candy bar.
C) He will be able to eat a little bit less of each candy bar than the previous candy bar.
D) He will realize that consuming four candy bars at one sitting is wasteful.

Question 8

According to the supply curve, if the price of an item goes down, what happens to the demand for that item?

A) It goes down.
B) It goes up.
C) It remains the same.
D) It fluctuates unpredictably.

Question 9

When examining a supply curve and a demand curve that have been plotted on the same set of axes, where will you find the equilibrium point?

A) At the point between the highest demand peak and the lowest supply valley.
B) At the point between the highest supply peak and the lowest demand valley.
C) At the point where the two curves end.
D) At the point where the two curves intersect.

Question 10

Why are cost-benefit analyses of health care often problematic or controversial from a human standpoint?

A) They generate a ration of health-related units to dollars that is not easily applicable to real world situations.
B) They are biased toward economic efficiency and fail to take costs like suffering and death into account.
C) They compare only two alternatives for an option, often neglecting viable third and fourth options.
D) They focus on disease trends to determine allocation of funds, often ignoring less common illnesses.