Question 1

If governments provide free healthcare services,

Accepted Answer

A) this illustrates that governments can provide healthcare more economically than private firms. 
B) output and consumption of other goods will not be sacrificed. 
C) resources with alternative uses are allocated to healthcare and there is an opportunity cost of these resources. 
D) the opportunity cost of the resources used to supply healthcare is zero. 
A) this illustrates that governments can provide healthcare more economically than private firms. 
B) output and consumption of other goods will not be sacrificed. 
C) resources with alternative uses are allocated to healthcare and there is an opportunity cost of these resources. 
D) the opportunity cost of the resources used to supply healthcare is zero. C

Question 2

How has public policy influenced the incentives of consumers to economize and suppliers to provide their services economically in the health-care industry?

Accepted Answer

Public policy has generally promoted payment for health-care services by third parties (either the government or insurance companies) rather than saving and/or direct payment. While health insurance provided through one's employer, including low deductibility plans with small co-payments, are tax-deductible, out-of-pocket medical expenses (except for those greater than 7 percent of income) are not. Neither is health insurance purchased directly by an individual or family. From a tax standpoint, insurance plans covering medical expenditures beginning with the first dollar of cost are treated in the same manner as catastrophic plans that cover only extraordinary expenses. All of this encourages the third-party payment of medical expenses and, thereby, reduces the economizing behavior of both health-care consumers and suppliers.

Question 3

Which of the following would increase the incentive of consumers to economize and of producers to provide medical services at economical prices?

Accepted Answer

A) substitution of catastrophic health insurance plans for low deductible, low co-payment plans 
B) more reliance on medical savings accounts rather than insurance 
C) equalization of tax treatment between out-of-pocket medical expenses and employer-provided health insurance 
D) all of the above 
A) substitution of catastrophic health insurance plans for low deductible, low co-payment plans 
B) more reliance on medical savings accounts rather than insurance 
C) equalization of tax treatment between out-of-pocket medical expenses and employer-provided health insurance 
D) all of the above D

Question 4

Which of the following would help control the future growth of healthcare prices and expenditures?

Accepted Answer

A) an increase in the share of healthcare costs paid for either directly or from personal medical savings accounts 
B) the substitution of catastrophic (high deductibility) health insurance for low co-payment plans 
C) more reliance on expansion in the supply of medical services rather than stimulation of demand 
D) all of the above 
A) an increase in the share of healthcare costs paid for either directly or from personal medical savings accounts 
B) the substitution of catastrophic (high deductibility) health insurance for low co-payment plans 
C) more reliance on expansion in the supply of medical services rather than stimulation of demand 
D) all of the above

Question 5

Which of the following would increase the incentive of healthcare consumers to economize and help reduce the future growth of healthcare prices in the United States?

Accepted Answer

A) an increase in the share of healthcare costs paid for either directly or from personal medical savings accounts 
B) subsidies that would encourage consumers to purchase low co-payment insurance plans 
C) a new government program that would cover the cost of prescription drugs purchased by all healthcare consumers 
D) a reduction in the eligibility age for the coverage of Medicare from 65 to 55 years of age 
A) an increase in the share of healthcare costs paid for either directly or from personal medical savings accounts 
B) subsidies that would encourage consumers to purchase low co-payment insurance plans 
C) a new government program that would cover the cost of prescription drugs purchased by all healthcare consumers 
D) a reduction in the eligibility age for the coverage of Medicare from 65 to 55 years of age

Question 6

By promoting third-party payment of health-care expenses and the purchase of health insurance through employers, health-care policy has

Accepted Answer

A) eroded the incentive of health-care consumers and providers to economize. 
B) undermined the smooth operation of health-care markets. 
C) made it more costly for persons without a job to obtain health insurance. 
D) done all of the above. 
A) eroded the incentive of health-care consumers and providers to economize. 
B) undermined the smooth operation of health-care markets. 
C) made it more costly for persons without a job to obtain health insurance. 
D) done all of the above.

Question 7

In countries such as Canada that have socialized health care, the government operates hospitals, and health-care services are financed through tax revenue. In these countries,

Accepted Answer

A) the government is able to provide as much health care, free of charge, as citizens would like. 
B) methods other than price, such as political rules and waiting lists, must be utilized to allocate health-care services. 
C) a large number of services, such as MRIs, that involve expensive equipment are performed. 
D) citizens are usually so satisfied with their health-care system that they never travel to other countries to purchase health-care services. 
A) the government is able to provide as much health care, free of charge, as citizens would like. 
B) methods other than price, such as political rules and waiting lists, must be utilized to allocate health-care services. 
C) a large number of services, such as MRIs, that involve expensive equipment are performed. 
D) citizens are usually so satisfied with their health-care system that they never travel to other countries to purchase health-care services.

Question 8

The growth rate of the elderly population will accelerate in the future as the baby boomers move into the retirement phase of life during the years following 2010. Unless structural changes are undertaken, this increase in the growth rate of the elderly population

Accepted Answer

A) will cause future health-care prices and expenditures to increase even more rapidly than in the past. 
B) will cause future health-care prices and expenditures to decrease rapidly. 
C) will cause the rate of technological advance in medicine to slow significantly. 
D) is generally expected to have no significant impact on the health-care industry. 
A) will cause future health-care prices and expenditures to increase even more rapidly than in the past. 
B) will cause future health-care prices and expenditures to decrease rapidly. 
C) will cause the rate of technological advance in medicine to slow significantly. 
D) is generally expected to have no significant impact on the health-care industry.

Question 9

As third-party payments and government expenditures on healthcare increased following the passage of Medicare and Medicaid,

Accepted Answer

A) total expenditures on healthcare declined. 
B) the incentive of consumers to economize on their use of healthcare services increased. 
C) the incentive of suppliers to provide healthcare services at a low cost increased. 
D) both the prices of healthcare services and total expenditures on those services increased rapidly. 
A) total expenditures on healthcare declined. 
B) the incentive of consumers to economize on their use of healthcare services increased. 
C) the incentive of suppliers to provide healthcare services at a low cost increased. 
D) both the prices of healthcare services and total expenditures on those services increased rapidly.

Question 10

Real expenditures on Medicare and Medicaid

Accepted Answer

A) rose during the 1970s and 1980s, but they have been declining since 1990. 
B) fell during the 1970s and 1980s, but they have been increasing since 1990. 
C) increased at about the same rate as real GDP during the last three decades. 
D) have approximately doubled during each of the last three decades. 
A) rose during the 1970s and 1980s, but they have been declining since 1990. 
B) fell during the 1970s and 1980s, but they have been increasing since 1990. 
C) increased at about the same rate as real GDP during the last three decades. 
D) have approximately doubled during each of the last three decades.

Question 11

Federal tax legislation makes it cheaper for individuals and families to pay for health care

Accepted Answer

A) by purchasing an insurance policy through their employer rather than paying for it directly with their own money. 
B) by purchasing an insurance policy through their employer rather than directly purchasing health insurance from the company of their choice. 
C) directly rather than through an insurance policy offered through their employer. 
D) by both a and b above. 
A) by purchasing an insurance policy through their employer rather than paying for it directly with their own money. 
B) by purchasing an insurance policy through their employer rather than directly purchasing health insurance from the company of their choice. 
C) directly rather than through an insurance policy offered through their employer. 
D) by both a and b above.

Question 12

The only two options to control the growth of healthcare spending are

Accepted Answer

A) price controls and political rationing or competition and market prices. 
B) taxation or political mandates. 
C) subsidizing of healthcare insurance or government provision of healthcare. 
D) free healthcare or subsidized healthcare. 
A) price controls and political rationing or competition and market prices. 
B) taxation or political mandates. 
C) subsidizing of healthcare insurance or government provision of healthcare. 
D) free healthcare or subsidized healthcare.

Question 13

Which of the following is true?

Accepted Answer

A) Healthcare in Canada and most of the European countries is a socialized industry. 
B) Socialization of the healthcare industry eliminates the problem of scarcity in the healthcare industry. 
C) The high-income countries of Europe are able to provide as much healthcare, free of charge, as their citizens want. 
D) All of the above are true. 
A) Healthcare in Canada and most of the European countries is a socialized industry. 
B) Socialization of the healthcare industry eliminates the problem of scarcity in the healthcare industry. 
C) The high-income countries of Europe are able to provide as much healthcare, free of charge, as their citizens want. 
D) All of the above are true.

Question 14

(I) The Medicare program is financed by general tax revenue and provides low-income families with access to health care either free or at a low cost. (II) The Medicaid program covers the bulk of the health-care costs of the elderly and is financed mostly through a tax on the wages and salaries of current workers.

Accepted Answer

A) I is true; II is false. 
B) I is false; II is true. 
C) Both I and II are true. 
D) Both I and II are false. 
A) I is true; II is false. 
B) I is false; II is true. 
C) Both I and II are true. 
D) Both I and II are false.

Question 15

As the Medicare program is expanded to cover the cost of prescription drugs for the elderly, other things constant, this will lead to

Accepted Answer

A) an increase in demand and higher prices for prescription drugs. 
B) an increase in demand and lower prices for prescription drugs. 
C) reduction in demand and lower prices for prescription drugs. 
D) reduction in demand and higher prices for prescription drugs. 
A) an increase in demand and higher prices for prescription drugs. 
B) an increase in demand and lower prices for prescription drugs. 
C) reduction in demand and lower prices for prescription drugs. 
D) reduction in demand and higher prices for prescription drugs.

Question 16

Special savings accounts that individuals could pay into directly and then use to pay medical bills or purchase a catastrophic health insurance plan are known as

Accepted Answer

A) flexible benefit accounts. 
B) health savings accounts. 
C) health-care savings bonds. 
D) HMOs. 
A) flexible benefit accounts. 
B) health savings accounts. 
C) health-care savings bonds. 
D) HMOs.

Question 17

Which of the following would encourage consumers to economize on health-care expenditures and producers to supply health-care services more efficiently?

Accepted Answer

A) an increase in out-of-pocket expenditures by health-care consumers 
B) decreased reliance on personal Medical Savings Accounts and health-care expenditures from the accounts 
C) decreased reliance on the purchase of catastrophic health insurance coverage and less reliance on insurance with first-dollar coverage and small co-payments 
D) the establishment of a national health-care system that would provide coverage to all people 
A) an increase in out-of-pocket expenditures by health-care consumers 
B) decreased reliance on personal Medical Savings Accounts and health-care expenditures from the accounts 
C) decreased reliance on the purchase of catastrophic health insurance coverage and less reliance on insurance with first-dollar coverage and small co-payments 
D) the establishment of a national health-care system that would provide coverage to all people

Question 18

When the 2010 Patient Protection and Affordable Care Act is fully implemented, it will

Accepted Answer

A) substantially reduce the share of health care expenses paid by a third party. 
B) require all Americans to purchase health care insurance from either a private or government source. 
C) increase the competitiveness of the health insurance business by allowing people to purchase the insurance across state boundaries. 
D) reduce the demand for health care and thereby lead to lower prices for health care services. 
A) substantially reduce the share of health care expenses paid by a third party. 
B) require all Americans to purchase health care insurance from either a private or government source. 
C) increase the competitiveness of the health insurance business by allowing people to purchase the insurance across state boundaries. 
D) reduce the demand for health care and thereby lead to lower prices for health care services.

Question 19

Healthcare price controls will lead to

Accepted Answer

A) more innovative healthcare treatments. 
B) waiting lines and lengthy delays for treatment. 
C) higher quality healthcare services. 
D) an increase in the supply of healthcare services. 
A) more innovative healthcare treatments. 
B) waiting lines and lengthy delays for treatment. 
C) higher quality healthcare services. 
D) an increase in the supply of healthcare services.

Question 20

In 2007, third-party payments accounted for approximately what percent of medical-care expenditures in the United States?

Accepted Answer

A) 25 percent 
B) 46 percent 
C) 65 percent 
D) 86 percent 
A) 25 percent 
B) 46 percent 
C) 65 percent 
D) 86 percent

Exam 22: Appendix: the Economics of Healthcare

If governments provide free healthcare services,

How has public policy influenced the incentives of consumers to economize and suppliers to provide their services economically in the health-care industry?

Which of the following would increase the incentive of consumers to economize and of producers to provide medical services at economical prices?

Which of the following would help control the future growth of healthcare prices and expenditures?

Which of the following would increase the incentive of healthcare consumers to economize and help reduce the future growth of healthcare prices in the United States?

By promoting third-party payment of health-care expenses and the purchase of health insurance through employers, health-care policy has

In countries such as Canada that have socialized health care, the government operates hospitals, and health-care services are financed through tax revenue. In these countries,

The growth rate of the elderly population will accelerate in the future as the baby boomers move into the retirement phase of life during the years following 2010. Unless structural changes are undertaken, this increase in the growth rate of the elderly population

As third-party payments and government expenditures on healthcare increased following the passage of Medicare and Medicaid,

Real expenditures on Medicare and Medicaid

Federal tax legislation makes it cheaper for individuals and families to pay for health care

The only two options to control the growth of healthcare spending are

Which of the following is true?

As the Medicare program is expanded to cover the cost of prescription drugs for the elderly, other things constant, this will lead to

Special savings accounts that individuals could pay into directly and then use to pay medical bills or purchase a catastrophic health insurance plan are known as

Which of the following would encourage consumers to economize on health-care expenditures and producers to supply health-care services more efficiently?

When the 2010 Patient Protection and Affordable Care Act is fully implemented, it will

Healthcare price controls will lead to

In 2007, third-party payments accounted for approximately what percent of medical-care expenditures in the United States?

The Economic Approach

A: Some Tools of the Economist

B: Some Tools of the Economist

A: Supply, Demand, and the Market Process

B: Supply, Demand, and the Market Process

A: Supply and Demand: Applications and Extensions

B: Supply and Demand: Applications and Extensions

Difficult Cases for the Market and the Role of Government

The Economics of Collective Decision-Making

Consumer Choice and Elasticity

A: Costs and the Supply of Goods

B: Costs and the Supply of Goods

A: Price Takers and the Competitive Process

B: Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

A: Price-Searcher Markets With High Entry Barriers

B: Price-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, Productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Appendix: Government Spending and Taxation

Appendix: the Economics of Social Security

Appendix: the Stock Market: Its Function, Performance, and Potential As an Investment Opportunity

Appendix: Great Debates in Economics: Keynes Versus Hayek

Appendix: the Crisis of 2008: Causes and Lessons for the Future

Appendix: Lessons From the Great Depression

Appendix:education: Problems and Performance

Appendix: Earnings Differences Between Men and Women

Appendix: the Question of Resource Exhaustion

Appendix: Do Labor Unions Increase the Wages of Workers

Appendix: Difficult Environmental Cases and the Role of Government

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