Deck 3: Cost and Benefit Analysis

Question 1

Failure to achieve the maximum total net societal benefit (TNSB) results in some amount of _______.

A) deadweight loss
B) negative TNSB
C) increasing opportunity costs
D) unnecessary direct costs
E) diminishing marginal productivity

Answer 1

A

Question 2

Discounting involves _______ by (1 + r)^t to obtain the _______ .

A) dividing the present value; willingness to pay
B) multiplying the future value; present value
C) multiplying the present value; willingness to pay
D) dividing the future value; present value
E) dividing the future value; willingness to pay

Answer 2

D

Question 3

Rationality implies that people will always make the correct choice.

Answer 3

False

Question 4

The use of a larger discount rate will result in a lower present value when estimating the costs and benefits of new medical technology.

Question 5

Which of the following is a limitation of cost-benefit analysis?

A) Difficulty choosing the correct discount rate
B) Difficulty measuring the value of a human life
C) Difficulty measuring the dollar value of gains / losses in utility
D) Both a and c are correct
E) All of the above

Question 6

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

Question 7

Cost-effectiveness analysis is useful in deciding if public funds should be spent on military personnel or public health initiatives.

Question 8

Using the incremental cost-effectiveness ratio, if a new medical technology represents a positive net cost and negative net effect, then _______,

A) the new medical technology dominates the old medical technology
B) the relative costs and benefits must be reviewed further
C) the old medical technology dominates the new medical technology
D) the discount rate utilized should be changed
E) a standard gamble should be utilized

Question 9

Money spent on transportation to a medical care provider is an example of _______.

A) direct medical care costs
B) direct nonmedical costs
C) indirect costs
D) deadweight loss
E) None of the above.

Question 10

Economists assume people behave rationally. If this were true, then the U.S. Surgeon General would only make decisions that benefit him/her financially.

Question 11

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.

Question 12

Which of the following is not a method used in constructing a health-utility index?

A) rating scale
B) standard gamble
C) time trade-off
D) discounting
E) both b and d

Question 13

Cost-effectiveness analysis assumes that _______.

A) the outcome is desirable
B) the marginal benefit is greater than the marginal cost
C) resources are unlimited
D) there are no indirect costs
E) new technology is preferable to old technology

Question 14

Cost-utility analysis assumes that life-years added due to a medical intervention are homogeneous.

Question 15

Which of the following is considered a shortcoming of the human capital approach?

A) It includes nonmarket returns
B) It is used to estimate the value of a human life
C) It includes labor market imperfections
D) All of the above
E) None of the above