Question 1

Since the demand for medical care is derived from the demand for good health, an increase in income will decrease the demand for medical care.

Accepted Answer

An increase in income is likely to increase the demand for medical care as people have more disposable income to spend on health and wellness products and services. This statement is therefore false.

Question 2

Demand for most medical services in the U.S. has been found to be inelastic.

Accepted Answer

This means that even if the price of medical services increases, the demand for those services will not decrease significantly. This is because people prioritize their health and well-being and are willing to pay for medical services regardless of the cost.

Question 3

A negative income elasticity of demand for out-patient services would imply that it is an inferior good.

Accepted Answer

A negative income elasticity of demand indicates that as income increases, the demand for the good decreases, which is characteristic of an inferior good.

Question 4

Which of the following might occur after acquiring health insurance due to moral hazard?&#10;A) A consumer visits a doctor more frequently.&#10;B) A consumer washes his / her hands more frequently.&#10;C) A consumer eats healthier.&#10;D) All of the above&#10;E) None of the above

Accepted Answer

Moral hazard refers to the phenomenon where having insurance leads individuals to change their behavior in a way that increases the likelihood of a negative event occurring. In the case of health insurance, this often means that individuals will use their insurance to visit the doctor more frequently, even if they do not have a serious medical issue. Therefore, choice A is the best answer. Choices B and C are not directly related to moral hazard.

Question 5

A _______ represents a fixed amount paid by the consumer that is independent of the market price or actual costs of medical care.&#10;A) deductible&#10;B) loading charge&#10;C) coinsurance rate&#10;D) claim&#10;E) copayment

Accepted Answer

A copayment is a fixed amount paid by the consumer at the time of receiving medical care, regardless of the actual cost of the care. It is commonly used in health insurance plans to share the cost of healthcare between the insurer and the consumer. A deductible is a fixed amount that the consumer must pay out of pocket before the insurance coverage begins. A loading charge is an additional premium that may be applied by the insurer based on risk factors such as age or occupation. A coinsurance rate is a percentage of the cost of medical care that the consumer must pay after the deductible has been met. A claim is a formal request for payment from the insurance company for medical services received by the consumer.

Question 6

When will the marginal utility per dollar spent on medical care equal the marginal utility per dollar spent on entertainment for a consumer?&#10;A) This will only occur when the consumer becomes ill.&#10;B) This will only occur when the consumer is healthy.&#10;C) This will only occur if the consumer seeks to maximize utility.&#10;D) This will only occur if the consumer does not enjoy most forms of entertainment.&#10;E) This will never occur.

Accepted Answer

This will only occur if the consumer seeks to maximize utility. Marginal utility per dollar spent on medical care will decrease as the consumer becomes healthier, while marginal utility per dollar spent on entertainment may increase as the consumer gains more leisure time or disposable income. Therefore, in order to achieve maximum utility, the consumer must balance their spending between medical care and entertainment until the marginal utility per dollar spent on both is equal.

Question 7

Larger deductible requirements decrease the risk of moral hazard.

Accepted Answer

Moral hazard refers to the tendency of insured individuals to increase their risk-taking behavior when the cost of that behavior is borne by the insurer. By requiring a larger deductible, the insured individual has to pay more out of pocket before the insurance coverage kicks in. This means that they are less likely to engage in risky behavior, as they will bear more of the financial cost of any negative outcomes. Therefore, larger deductible requirements decrease the risk of moral hazard.

Question 8

The _______ refers to the impact a lower price for medical care has on the real purchasing power of consumers.&#10;A) income effect&#10;B) inflation rate&#10;C) effective demand&#10;D) substitution effect&#10;E) nominal demand

Accepted Answer

The income effect refers to the change in the real purchasing power of consumers due to a change in price. If the price for medical care decreases, consumers may be able to purchase more medical care with their existing income, thus increasing their real purchasing power. This is known as the income effect. The other options (B) inflation rate, (C) effective demand, (D) substitution effect, and (E) nominal demand are not directly related to the impact of lower medical care prices on consumer purchasing power.

Question 9

The _______ refers to how much more or less of a product consumers buy when its price changes.&#10;A) intensive margin&#10;B) extensive margin&#10;C) nominal demand&#10;D) effective demand&#10;E) fuzzy demand

Accepted Answer

The intensive margin refers to the change in the quantity of a product that consumers buy when its price changes.

Question 10

A positive cross-price elasticity estimate between in-patient and out-patient services at a hospital would imply that the two are _______.&#10;A) normal goods&#10;B) inferior goods&#10;C) compliments&#10;D) substitutes&#10;E) unrelated

Accepted Answer

A positive cross-price elasticity estimate between in-patient and out-patient services at a hospital implies that these services are substitutes. A substitute good is one that can be used in place of another good. If the price of one good increases, the demand for the substitute good will increase, resulting in a positive cross-price elasticity.

Question 11

Time costs of acquiring medical care are considered _______.&#10;A) direct non-medical costs&#10;B) direct medical costs&#10;C) opportunity costs&#10;D) both a and b&#10;E) both a and c

Accepted Answer

The answer of Time costs of acquiring medical care are...

Question 12

Insurance _______ the price for medical care, thereby _______ the demand for it.&#10;A) increases; decreases&#10;B) decreases; decreases&#10;C) increases; increases&#10;D) decreases; increases&#10;E) None of the above

Accepted Answer

The answer of Insurance _______ the price for medical care,...

Question 13

As consumers purchase more medical care, the marginal utility per dollar spent on medical care increases.

Accepted Answer

The answer of As consumers purchase more medical care, the...

Question 14

Consumer demand for medical care is considered a _______ demand, as it depends on the consumer's demand for good health.&#10;A) absolute&#10;B) derived&#10;C) relative&#10;D) supplemental&#10;E) supply-side

Accepted Answer

The answer of Consumer demand for medical care is considered...

Question 15

The _______ refers to how many more or fewer people buy a product when its price changes.&#10;A) intensive margin&#10;B) extensive margin&#10;C) nominal demand&#10;D) effective demand&#10;E) fuzzy demand

Accepted Answer

The answer of The _______ refers to how many more...

Deck 5: The Demand for Medical Care