Question 1

Suppose a hospital agrees not to charge an insurer a higher price than any other insurer. This would be an example of a _______.

Accepted Answer

The agreement not to charge an insurer a higher price than any other insurer is an example of a most favored nation clause, which requires the hospital to offer the same price to all insurers. This helps prevent price discrimination and promotes competition among insurers. Exclusive dealing contracts, tying contracts, and price ceilings are not applicable to this scenario.

Question 2

If a price ceiling on physician services is going to be effective, it must be set ______ the competitive market equilibrium price to prevent the market from driving the price _______.

Accepted Answer

A price ceiling to be effective must be set below the competitive market equilibrium price to prevent the market from driving the price up. This is because a price ceiling is a maximum price that can be charged for a product or service, and setting it below the equilibrium price ensures that the price does not rise above this maximum limit.

Question 3

Public goods are considered to be both _______ and _______.

Accepted Answer

Public goods are characterized by being non-rival (one person's consumption does not reduce the amount available for others) and non-excludable (it is not possible to prevent anyone from consuming the good).

Question 4

Industrial pollution is an example of _______.

Accepted Answer

Industrial pollution is a negative supply-side externality because it is a cost imposed on society by industrial producers. The producers do not bear the full cost of the pollution they emit, and this cost is shifted to society in the form of health problems, environmental damage, and reduced quality of life.

Question 5

The U.S. federal income tax is _______, and therefore provides incentives for higher income individuals to purchase _______ amounts of employer-sponsored health insurance.

Accepted Answer

The U.S. federal income tax is progressive, meaning that individuals with higher incomes are taxed at higher rates. This system provides an incentive for higher income individuals to purchase larger amounts of employer-sponsored health insurance because the premiums for such insurance are often excluded from taxable income, thus reducing their overall tax burden.

Question 6

Medicare and Medicaid are both demand-side subsidies.

Accepted Answer

Medicare and Medicaid are both programs that provide financial assistance to those who are in need of healthcare services. These subsidies are considered to be demand-side because they help to increase the demand for healthcare services by making it more affordable for people to access them.

Question 7

If a price ceiling in a competitive market for physician services is effective, it will result in a market ______ of physician services due to the _______ price.

Accepted Answer

A price ceiling, when set below the equilibrium price, leads to a shortage because the lower price increases the quantity demanded while decreasing the quantity supplied.

Question 8

A price ceiling will increase the quantity of medical care produced in a monopoly market.

Accepted Answer

The answer of A price ceiling will increase the quantity...

Question 9

Government funding of medical schools is an example of a supply-side subsidy.

Accepted Answer

Government funding of medical schools increases the supply of trained medical professionals, which is an example of a supply-side subsidy.

Question 10

Suppose a government decides to subsidize flu vaccinations in an attempt to correct a market failure. Without this government intervention, the flu vaccination would most likely be ______ due to the presence of _______.

Accepted Answer

Flu vaccinations are typically under-consumed due to the presence of positive externalities. When an individual gets vaccinated, they not only protect themselves but also reduce the likelihood of transmitting the flu to others, creating a benefit for society that the individual may not consider when deciding whether to get vaccinated.

Question 11

Flu vaccinations are an example of _______.

Accepted Answer

Flu vaccinations have a positive demand-side externality because when one person gets vaccinated, it not only protects them but also decreases the probability of other people getting infected. This creates a positive spillover effect on society, reducing the overall spread of the flu.

Question 12

Penalties levied on consumers for the purchase of "Cadillac" health insurance plans are meant to correct for the positive externalities associated with these plans.

Accepted Answer

The penalties on "Cadillac" health insurance plans are meant to discourage overly generous coverage that can lead to excessive healthcare spending, not to correct for positive externalities.

Question 13

Medical care is a public good, as it is both non-rival and non-excludable.

Accepted Answer

Medical care is not a public good because it is both rival (one person's use of medical care can diminish the ability of another to use it) and excludable (people can be prevented from accessing medical care through prices or other means).

Question 14

Suppose a manufacturer of artificial hips required any medical care provider to purchase a specific set of surgical tools along with each artificial hip. This would be an example of a _______.

Accepted Answer

This scenario is an example of a tying contract, where the manufacturer is requiring the purchase of specific surgical tools with each artificial hip. An exclusive dealing contract would require the medical care provider to only purchase from that specific manufacturer, while a most favored nation clause would ensure that the medical care provider receives the best price available from the manufacturer. A price ceiling would limit the amount the manufacturer could charge for the artificial hip, which is not relevant in this scenario.

Question 15

Cigarette smoking is an example of _______.

Accepted Answer

Cigarette smoking creates a negative demand-side externality as it has adverse effects on the health of both the smoker and the people around them who are subjected to secondhand smoke.

Quiz 9: Government, Health, and Medical Care

Suppose a hospital agrees not to charge an insurer a higher price than any other insurer. This would be an example of a _______.

If a price ceiling on physician services is going to be effective, it must be set the competitive market equilibrium price to prevent the market from driving the price _.

Public goods are considered to be both _ and _.