Question 1

Supply curves are positively-sloped because of

Accepted Answer

The law of diminishing returns states that as more units of a good are produced, the marginal cost of producing each additional unit increases. This results in a positively-sloped supply curve as suppliers require higher prices to incentivize them to produce more. Choices A, C, and D do not fully explain why supply curves are positively-sloped.

Question 2

Suppose robotic technology improves the results of abdominal surgery-less time to perform the surgery, faster recovery times, and fewer mistakes.What is the impact on the market for abdominal surgery using this new technology?

Accepted Answer

With improved results, demand for robot-assisted surgery is likely to increase as patients and hospitals are willing to pay for the benefits.

Answer: B is incorrect. Hospitals are likely to adopt the technology to remain competitive and attract patients.

Answer: C is incorrect. While the role of surgical assistants may change, there is unlikely to be a significant increase in demand for them.

Answer: D is incorrect. Only option A is applicable in this scenario.

Question 3

A shortage of hospital beds will likely lead to

Accepted Answer

When there is a shortage of hospital beds, the demand for hospital beds will still exist, but the supply will be limited. This can result in an increase in the price of a hospital stay due to increased competition among patients for a limited number of beds. Healthcare facilities may have to adjust their prices to ensure they can continue to deliver quality care and potentially expand their facilities to accommodate the increased demand.

Question 4

Which of the following will not cause a shift in the medical care supply curve?

Accepted Answer

A change in the percentage of the population with health insurance affects the demand for medical care, not the supply. The other options involve factors that directly impact the supply side, such as costs and availability of resources.

Question 5

An inferior good

Accepted Answer

An inferior good is characterized by a negative income elasticity, meaning demand decreases as income increases. Therefore, both A and B are true.

Question 6

The dead-weight loss from an excise tax

Accepted Answer

The dead-weight loss from an excise tax is the lost surplus that results from higher prices and lower output resulting from the tax. It occurs because the tax reduces consumer and producer surplus, leading to a reduction in overall welfare. The magnitude of the dead-weight loss depends on the elasticities of demand and supply. If demand is perfectly inelastic (i.e., there is no substitute for the taxed good), the dead-weight loss will be smaller because consumers cannot easily switch to other products, and firms can pass on the tax to consumers.

Question 7

use the following scenario.You are a consultant and have been employed by Urban General, a large inner-city hospital, to estimate the demand for its services.Your research indicates that the income elasticity of demand for the target market is +0.50; the price elasticity of demand is -0.15; and the cross-price elasticity of demand with respect to the price of services at St.Elsewhere, a near-by hospital, is +0.35.Answer the following questions.
-The price of services at Urban General falls by 10 percent.

Accepted Answer

The price elasticity of demand (-0.15) indicates that a 10% decrease in price will result in a 1.5% increase in quantity demanded at Urban General. The income elasticity of demand is not relevant for this scenario, and the cross-price elasticity of demand with respect to St. Elsewhere's prices is also not relevant as it does not directly affect the demand for services at Urban General.

Question 8

Suppose the market for hospital outpatient treatment is in equilibrium when a price ceiling is set below the equilibrium price.What do you expect to happen?

Accepted Answer

When a price ceiling is set below the equilibrium price, the price that consumers pay is now lower than the market equilibrium price, which encourages more people to demand outpatient treatment but discourages suppliers from supplying it. This leads to excess demand or a shortage of hospital outpatient treatment.

Question 9

Within the framework of economics, optimization means providing a good or service until

Accepted Answer

Optimization in economics occurs when marginal benefits equal marginal costs, as this is the point where net benefits are maximized.

Question 10

Which of the following will not change the demand for office visits to the physician?

Accepted Answer

A change in the price of an office visit will not change the demand for office visits, but it will change the quantity demanded. The other options listed will all affect the demand for office visits in various ways.

Question 11

use the following scenario.You are a consultant and have been employed by Urban General, a large inner-city hospital, to estimate the demand for its services.Your research indicates that the income elasticity of demand for the target market is +0.50; the price elasticity of demand is -0.15; and the cross-price elasticity of demand with respect to the price of services at St.Elsewhere, a near-by hospital, is +0.35.Answer the following questions.
-The price of services at St.Elsewhere falls by 10 percent.What happens to the quantity of services demanded at Urban General?

Accepted Answer

The cross-price elasticity of demand measures the responsiveness of demand for one good to a change in the price of another. In this case, the cross-price elasticity of demand between the services of Urban General and St.Elsewhere is +0.35. A decrease of 10% in the price of services at St.Elsewhere would lead to a decrease in demand for the services provided by Urban General by 0.15 x 10 x 0.35 = 0.525. This represents a 3.5% reduction in demand for Urban General's services.

Question 12

The following graph depicts the market for CT scanners in the United States. Assume an initial equilibrium at D₁ and S₁ with price of $200,000 per machine.If the government places a $20,000 excise tax on each new scanner sold, the new equilibrium price will be

Accepted Answer

An excise tax increases the cost of production and supply shifts upward by the amount of the tax. Therefore, S₁ shifts to the left by $20,000 and becomes SS2U2B11S2U2B0. The new equilibrium occurs at the intersection of the new supply curve (SS2U2B11S2U2B0) and the original demand curve (D₁) which results in a new price of less than $220,000.

Question 13

Suppose the U.S.Drug Enforcement Agency steps up its efforts to control the illegal importation of cocaine into the United States.What is the likely effect on the market for illegal drugs in the United States?

Accepted Answer

When the DEA steps up their efforts to control the illegal importation of cocaine, it becomes more difficult and risky to import cocaine. This will likely result in a decrease in the quantity of cocaine being imported into the United States, which could lead to an increase in price. However, the effect on price depends on the elasticity of demand for cocaine. If demand for cocaine is relatively inelastic, then the increase in price may not be significant enough to deter consumption. It is also possible that consumers may switch to alternative drugs such as marijuana, causing an increase in demand and a decrease in price for that substitute drug. Nonetheless, the most likely scenario is that the increase in enforcement will decrease the quantity of cocaine entering the country and increase the price for those who are still willing to purchase it.

Question 14

A physician's office expenses increase 10 percent, so she decides to raise the price of office visits.Assuming the demand curve for office visits does not shift, what will happen to the total number of office visits and practice revenues?

Accepted Answer

If the demand for office visits is inelastic,then a 1% change in price will lead to less than a 1% change in quantity.

Question 15

use the following scenario.You are a consultant and have been employed by Urban General, a large inner-city hospital, to estimate the demand for its services.Your research indicates that the income elasticity of demand for the target market is +0.50; the price elasticity of demand is -0.15; and the cross-price elasticity of demand with respect to the price of services at St.Elsewhere, a near-by hospital, is +0.35.Answer the following questions.
-What is the cumulative effect of a simultaneous increase in area income of 5 percent and a 10 percent increase in prices at Urban General?

Accepted Answer

The answer of use the following scenario.You are a consultant...

Question 16

Suppose angioplasty and coronary artery bypass graft (CABG) surgery are substitute treatment alternatives for coronary artery disease.What should happen to the equilibrium price and quantity of angioplasty procedures if a new CABG technique is introduced that is less invasive (requiring a 4 inch incision under the breast bone rather than cracking open the patient's rib cage) and requires one-third the recovery period of regular CABG surgery.

Accepted Answer

The new CABG technique makes it a more attractive substitute for angioplasty, leading to a decrease in demand for angioplasty, which results in a decrease in both its equilibrium price and quantity.

Question 17

Suppose the demand curve for medical care services is perfectly inelastic.What will happen to the equilibrium price and quantity if supply increases?

Accepted Answer

When demand is perfectly inelastic, quantity demanded does not change with price changes. Therefore, if supply increases, the equilibrium price will fall, but the quantity will remain the same.

Question 18

use the following scenario.You are a consultant and have been employed by Urban General, a large inner-city hospital, to estimate the demand for its services.Your research indicates that the income elasticity of demand for the target market is +0.50; the price elasticity of demand is -0.15; and the cross-price elasticity of demand with respect to the price of services at St.Elsewhere, a near-by hospital, is +0.35.Answer the following questions.
-Area income increases by 20 percent.

Accepted Answer

With an income elasticity of +0.50, a 20% increase in income would lead to a 10% increase in quantity demanded at Urban General (0.50 x 20 = 10).

Quiz 2: Using E Conomics to Study Health Care Issues