Question 1

Which of the following is not an assumption used in class for reaching the conclusion, using utilitarian reasoning, that income should be divided equally:

Accepted Answer

The assumption that some people are more productive than others is not used in reaching the conclusion that income should be divided equally using utilitarian reasoning. Utilitarian reasoning for equal income distribution typically relies on the assumptions that everyone has the same utility function, there is a fixed amount of income to be divided, and that marginal utility diminishes with income, without considering individual productivity differences.

Question 2

In the economic analysis of the market for new drugs, it is critical to take into account

Accepted Answer

All of the options listed are critical factors in the economic analysis of the market for new drugs. Patents can lead to monopoly power and inefficiency, high prices can create inequity, and incentives for innovation are essential for the development of new drugs.

Question 3

Suppose that you have complete health insurance that covers all expenses. You will use medical care up to the point where your:

Accepted Answer

With complete health insurance covering all expenses, individuals will consume medical care until the marginal benefit of additional care is zero, as they do not bear any cost.

Question 4

If the government subsidizes the health insurance costs of individuals because individuals do not sufficiently realize the importance of having health insurance, which of the following justifications for government intervention is being used?

Accepted Answer

This scenario is an example of government intervention justified by ignorance, where individuals do not fully understand the benefits or importance of having health insurance, leading the government to step in to encourage or support its acquisition.

Question 5

Which of the following is a reason why employers are the predominant source of insurance?

Accepted Answer

Both B and C are correct reasons why employers are the predominant source of insurance. Insuring at the firm level allows for the creation of large pools with predictable medical risk distributions, and employee compensation in the form of medical expenditures is not taxed, making it a tax-efficient form of compensation.

Question 6

An individual is willing to pay something for information because

Accepted Answer

Information allows individuals to make better decisions, which can lead to an increase in their satisfaction or utility.

Question 7

An individual will not choose to acquire all available information because

Accepted Answer

The answer of An individual will not choose to acquire...

Question 8

A market participant who obeys the principles of rational expectations will base his or her expectations of market price on

Accepted Answer

Rational expectations theory suggests that individuals use all available information, including supply and demand curves, to make informed predictions about future market prices.

Question 9

The standard economic model assumes people are

Accepted Answer

People are assumed to be rational in the standard economic model, meaning they make decisions that maximize their own benefit.

Question 10

What is the methodology of positive economics

Accepted Answer

Positive economics focuses on objective and fact-based analysis where the outcomes can be measured and tested. Thus, models in positive economics are judged based on their predictive accuracy, not on the realism of their assumptions or whether they prescribe optimal behaviors.

Quiz 4: Insurance and Healthcare Market Analysis