Deck 9: Health Care

Question 1

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

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

Answer 1

adverse selection

Question 2

In 2014, total spending on health as a percentage of GDP was 4.9 percent.

A)True
B)False
C)Uncertain

Answer 2

False

Question 3

Low-risk individuals prefer zero coverage to social insurance.

A)True
B)False
C)Uncertain

Answer 3

True

Question 4

When people have diminishing marginal utility, they have a preference for

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

Question 5

One reason for increasing health care costs is the aging of the population.

A)True
B)False
C)Uncertain

Question 6

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

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

Question 7

Government per capita spending on health has been trending upwards.

A)True
B)False
C)Uncertain

Question 8

When people take less care to avoid risks because they have insurance, this is known as

A)adverse selection.
B)asymmetric information.
C)moral hazard.
D)risk aversion.

Question 9

An actuarially fair insurance premium would charge more than required to cover the expected compensation for the expenses.

A)True
B)False
C)Uncertain

Question 10

The demand for insurance depends on the level of

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

Question 11

In the figure below, the value of insurance is $7,000.

A)True
B)False
C)Uncertain

Question 12

The proportion of Medicare services, such as drugs, that is not fully insured is called the

A)user fee.
B)risk premium.
C)loading fee.
D)coinsurance rate.

Question 13

Among the OECD countries, which country had the highest total health expenditures as a percent of GDP in 2011?

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

Question 14

Canada's national healthcare program is governed by the

A)Canada Health Act.
B)Canada Social Transfer.
C)Canada Health Transfer.
D)Constitution Act.

Question 15

In the figure below, $40,000 for certain is as desirable as $47,000 with risk.

A)True
B)False
C)Uncertain

Question 16

In 2014, the province with the lowest per capita health expenditures was

A)Alberta.
B)Ontario.
C)Quebec.
D)Newfoundland and Labrador.

Question 17

Health care markets may be inefficient because of

A)moral hazard.
B)adverse selection.
C)poor information.
D)all of these answer options are correct.

Question 18

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

A)decrease
B)increase
C)do nothing regarding
D)none of these answers is correct.

Question 19

Expected values

A)are weighted by the probability of an outcome occurring.
B)are calculated as the average value.
C)are calculated over all possible outcomes.
D)all of these answer options are correct.

Question 20

Social insurance programs are not subject to adverse selection.

A)True
B)False
C)Uncertain

Question 21

Suppose that an economist has a utility function U = (Income)0.25. Her income is $65K a year, but there is a 10 percent chance of becoming ill and making only $57K.
(a)What is her expected utility if she does not have insurance?
(b)What is the actuarially fair insurance premium?
(c)How much is she willing to pay for insurance?

Question 22

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 payout that the company can expect from insuring these two?

Question 23

Suppose that the quantity demanded of visits to a doctor per year is given by X = 12 - 0.05P, where X is the number of visits and P is the price the patient pays for a visit.
(a)How many visits would the patient make if he or she had to pay the full price of a visit, $100?
(b)How many visits would the patient make if medical services were free?

Question 24

With increasing costs to the Canadian health system, what are some ways the government could try to mitigate this increase?

Question 25

It has been suggested in both the Kirby Report and Romanow Report that drugs be included as part of the publicly funded health plan. Do you think this recommendation should be adopted?

Question 26

The difference between the willingness to pay and the actuarially fair premium is known as

A)the loading fee.
B)the expected utility.
C)the level of risk aversion.
D)the risk premium.

Question 27

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 28

Data suggests that wait times in Canada are lower relative to the United States.

A)True
B)False
C)Uncertain

Question 29

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