Question 1

According to the Manning study, people with $1,000-deductible health care coverage had:

Accepted Answer

A) better health outcomes than those with first-dollar coverage. 
B) the same health outcomes as those with first-dollar coverage. 
C) worse health outcome than those with first-dollar coverage. 
D) worse health outcomes than those with no insurance coverage. 
A) better health outcomes than those with first-dollar coverage. 
B) the same health outcomes as those with first-dollar coverage. 
C) worse health outcome than those with first-dollar coverage. 
D) worse health outcomes than those with no insurance coverage.

Question 2

In the United States, the emergence of the third-party payment system explains ______ of the increase in health care expenditures from 1940 to the present.

Accepted Answer

A) all 
B) a great deal 
C) almost none 
D) none 
A) all 
B) a great deal 
C) almost none 
D) none

Question 3

Consider a police department trying to decide how to allocate its crime prevention resources between motor vehicle thefts and burglaries. The marginal benefit of one less motor vehicle theft is $20,000, and the marginal benefit of one less burglary is $1,000. Suppose the annual number of motor vehicle thefts and the annual number of burglaries depends on the number of detectives assigned to each type of crime, as shown in the table below. Each detective costs $35,000 each per year, regardless of whether the detective is assigned to motor vehicle thefts or burglaries.   The marginal benefit of the fourth detective assigned to burglaries is ______ per year.

Accepted Answer

A) $10,000 
B) $0 
C) $200,000 
D) $20,000 
A) $10,000 
B) $0 
C) $200,000 
D) $20,000

Question 4

The most efficient distribution of pollution abatement is such that the:

Accepted Answer

A) extent of pollution abatement is the same across all geographic regions. 
B) extent of pollution abatement is the same across all polluters. 
C) largest reductions in pollution are made by the largest polluters. 
D) marginal cost of abatement is the same across all polluters. 
A) extent of pollution abatement is the same across all geographic regions. 
B) extent of pollution abatement is the same across all polluters. 
C) largest reductions in pollution are made by the largest polluters. 
D) marginal cost of abatement is the same across all polluters.

Question 5

The textbook cites a study comparing a group of consumers with first-dollar coverage to a group with a $1,000 deductible. The study results indicate that those with the deductible spent _____ on health care and had ______ health outcomes.

Accepted Answer

A) less; the same 
B) more; better 
C) more; the same 
D) less; worse 
A) less; the same 
B) more; better 
C) more; the same 
D) less; worse

Question 6

Suppose the figure below shows Luke's demand curve for check-ups along with the supply curve for check-ups.   Relative to when Luke has to pay the entire marginal cost of each check-up, the loss of total economic surplus due to first-dollar medical insurance would be ______ per year.

Accepted Answer

A) $100 
B) $200 
C) $300 
D) $400 
A) $100 
B) $200 
C) $300 
D) $400

Question 7

It is socially optimal to hire an additional police officer if:

Accepted Answer

A) the marginal benefit of doing so is positive. 
B) hiring an additional police officer reduces crime. 
C) the marginal benefit of doing so is greater than the marginal cost. 
D) the marginal benefit of hiring a police officer is decreasing. 
A) the marginal benefit of doing so is positive. 
B) hiring an additional police officer reduces crime. 
C) the marginal benefit of doing so is greater than the marginal cost. 
D) the marginal benefit of hiring a police officer is decreasing.

Question 8

The graph below illustrates the marginal cost, marginal private benefit, and marginal social benefit of being vaccinated against a contagious childhood disease.   Private market incentives would result in ______ vaccinations per day, but the socially optimal number of vaccinations is ______ per day.

Accepted Answer

A) 200; 300 
B) 200; 400 
C) 300; 0 
D) 300; 200 
A) 200; 300 
B) 200; 400 
C) 300; 0 
D) 300; 200

Question 9

Two firms, Industrio and Capitalista, have access to five production processes, each of which has a different cost and gives off a different amount of pollution. The daily costs of the processes and the corresponding number of tons of smoke emitted are shown in the table below. Both firms currently use process A, and each emits 4 tons of smoke per day. The government is considering two plans to reduce pollution: requiring both firms to reduce pollution by 25 percent or auctioning pollution permits. Each permit would entitle the owner to emit one ton of smoke per day. Without a permit, no smoke can be emitted. $$\begin{array} { | c | c | c | c | c | c | } 
\hline & \text { A } & \text { B } & \text { C } & \text { D } & \text { E } \
\hline \text { Process } & \text { (smoke/day) } & \text { (4 tons/day) } & \text { (3 tons/day) } & \text { (2 tons/day) } & \text { (1 tons/day) } \
\hline \text { Cost to Industrio (\$/day) } & \$ 350 & \$ 400 & \$ 500 & \$ 700 & \$ 1,000 \
\hline \text { Cost to Capitalista (\$/day) } & \$ 225 & \$ 250 & \$ 290 & \$ 400 &\$600 \
\hline
\end{array}$$ Suppose a permit system has been adopted and each firm has already purchased one permit. Industrio would be willing to pay up to ______ for the right to emit a second ton of smoke, and Capitalista would be willing to pay up to ______ for the right to emit a second ton of smoke.

Accepted Answer

A) $200; $300 
B) $200; $110 
C) $100; $40 
D) $500; $290 
A) $200; $300 
B) $200; $110 
C) $100; $40 
D) $500; $290

Question 10

Pat has just graduated from college and has two job offers. One pays $45,000 and requires that Pat supervise employees doing construction work on a busy highway. The other is an office job that pays $40,000. Chris has received the same offers from the same firms. Pat values the added safety of the office job at $6,000 per year, and Chris values the added safety of the office job at $3,000 per year. Suppose that the agency that regulates highway safety requires that the highway construction firm provide additional safety precautions. After the changes, Chris places no additional value on working at the office, and Pat values the added safety of the office job by $2,000 per year. If the safety precautions cost the firm $3,000 per year and the highway construction firm reduces salaries by $3,000 to $42,000, then:

Accepted Answer

A) Pat will prefer the office job, and Chris will be indifferent between the two jobs. 
B) both will prefer the highway job. 
C) both will prefer the office job. 
D) Chris will prefer the highway job, and Pat will be indifferent between the two jobs. 
A) Pat will prefer the office job, and Chris will be indifferent between the two jobs. 
B) both will prefer the highway job. 
C) both will prefer the office job. 
D) Chris will prefer the highway job, and Pat will be indifferent between the two jobs.

Question 11

The figure below shows Ava's demand curve for days in the hospital. The marginal cost of an additional day in the hospital is $200.   If Ava had first-dollar medical insurance, then she would choose to stay ______ day(s) in the hospital.

Accepted Answer

A) 4 
B) 1 
C) 2 
D) 3 
A) 4 
B) 1 
C) 2 
D) 3

Question 12

Consider a police department trying to decide how to allocate its crime prevention resources between motor vehicle thefts and burglaries. The marginal benefit of one less motor vehicle theft is $20,000, and the marginal benefit of one less burglary is $1,000. Suppose the annual number of motor vehicle thefts and the annual number of burglaries depends on the number of detectives assigned to each type of crime, as shown in the table below. Each detective costs $35,000 each per year, regardless of whether the detective is assigned to motor vehicle thefts or burglaries.   The marginal benefit of the second detective assigned to motor vehicle thefts is ______ per year

Accepted Answer

A) $30,000 
B) $3,000 
C) $260,000 
D) $60,000 
A) $30,000 
B) $3,000 
C) $260,000 
D) $60,000

Question 13

Suppose Matt and Gabe must both choose between two jobs, a safe job that pays $250 per week and a risky job that pays $300 per week. The value of safety to each is $75 per week. Having more income than the other is worth $75 per week to each, and having less income than the other means a $75-per-week reduction in satisfaction. Having the same income as the other means no change in satisfaction. The payoff matrix below summarizes this situation.   In this game, we can predict that choosing the risky job will:

Accepted Answer

A) give Matt more satisfaction only if Gabe chooses the risky job. 
B) give Matt more satisfaction only if Gabe chooses the safe job. 
C) give Matt more satisfaction no matter which job Gabe chooses. 
D) never give Matt more satisfaction. 
A) give Matt more satisfaction only if Gabe chooses the risky job. 
B) give Matt more satisfaction only if Gabe chooses the safe job. 
C) give Matt more satisfaction no matter which job Gabe chooses. 
D) never give Matt more satisfaction.

Question 14

Compared to patients covered by conventional health insurance plans, patients in HMOs might receive fewer medical services because HMOs:

Accepted Answer

A) have legal protection from malpractice lawsuits. 
B) employ lower quality doctors. 
C) receive a fixed annual fee regardless of the amount of medical services provided. 
D) save costs by purchasing lower quality medical equipment. 
A) have legal protection from malpractice lawsuits. 
B) employ lower quality doctors. 
C) receive a fixed annual fee regardless of the amount of medical services provided. 
D) save costs by purchasing lower quality medical equipment.

Question 15

Two companies, Dirty Inc. and Filthy Inc., each of which has access to 5 different production processes, each of which has a different cost and produces a different amount of pollution. The daily costs of the processes and the number of tons of smoke emitted are shown in the table below. $$\begin{array} { | c | c | c | c | c | c | } 
\hline \text { Process } & \text { A } & \text { B } & \text { C } & \text { D } & \text { E } \
\hline \text { (smoke/day) } & \text { (4 tons/day) } & \text { (3 tons/day) } & \text { (2 tons/day) } & \text { (1 ton/day) } & \text { (0ns/day) } \
\hline \text { Cost to Dirty Inc. (\$/day) } & \$ 110 & \$ 200 & \$ 380 & \$ 740 & \$ 1,460 \
\hline \text { Cost to Filthy Inc. (\$/day) } & \$ 400 & \$ 430 & \$ 490 & \$ 580 & \$700\
\hline
\end{array}$$ Suppose pollution is initially unregulated. If the City Council requires each firm to reduce emissions by 50 percent, then the total cost to society of this policy will be ______ per day.

Accepted Answer

A) $360 
B) $380 
C) $490 
D) $870 
A) $360 
B) $380 
C) $490 
D) $870

Question 16

Suppose Matt and Gabe must both choose between two jobs, a safe job that pays $250 per week and a risky job that pays $300 per week. The value of safety to each is $75 per week. Having more income than the other is worth $75 per week to each, and having less income than the other means a $75-per-week reduction in satisfaction. Having the same income as the other means no change in satisfaction. The payoff matrix below summarizes this situation.   If we compare the payoffs when both choose the risky job to the payoffs when both choose the safe job, then we can see that:

Accepted Answer

A) each would be better off if they both picked the risky job. 
B) each would be better off if they both picked the safe job. 
C) it is socially optimal for both to pick the risky job. 
D) both are equally off with either outcome. 
A) each would be better off if they both picked the risky job. 
B) each would be better off if they both picked the safe job. 
C) it is socially optimal for both to pick the risky job. 
D) both are equally off with either outcome.

Question 17

Suppose there are three power-generating plants, each of which has access to 5 different production processes. The table below summarizes the cost of each production process and the corresponding number of tons of smoke emitted each. $\begin{array}{|c|c|c|c|c|c|}
\hline \text { Process } & \text { A } & \text { B } & \text { C } & \text { D } & \text { E } \
\text { (smoke/day) } & \text { (4 tons/day) } & \text { (3 tons/day) } & \text { (2 tons/day) } & (1 \text { ton/day) } & \text { (0 tons/day) } \
\hline \text { Cost to Firm } X(\$ / \text { day) } & \$ 500 & \$ 514 & \$ 530 & \$ 555 & \$ 585 \
\hline \text { Cost to Firm Y (\$/day) } & \$ 400 & \$ 420 & \$ 445 & \$ 480 & \$ 520 \
\hline \text { Cost to Firm Z(\$/day) } & \$ 300 & \$ 325 & \$ 360 & \$ 400 & \$ 550 \
\hline
\end{array}$
 The least costly way of lowering smoke emissions from 12 tons to 9 tons per day would be for:

Accepted Answer

A) each firm to reduce emissions by 1 ton, emitting 3 tons each. 
B) Firm X to emit 2 tons, Firm Y to emit 3 tons and Firm Z to emit 4 tons. 
C) Firm X to emit 4 tons, Firm Y to emit 3 tons and Firm Z to emit 2 tons. 
D) Firm X to emit 1 ton, Firm Y to emit 4 tons and Firm Z to emit 4 tons. 
A) each firm to reduce emissions by 1 ton, emitting 3 tons each. 
B) Firm X to emit 2 tons, Firm Y to emit 3 tons and Firm Z to emit 4 tons. 
C) Firm X to emit 4 tons, Firm Y to emit 3 tons and Firm Z to emit 2 tons. 
D) Firm X to emit 1 ton, Firm Y to emit 4 tons and Firm Z to emit 4 tons.

Question 18

Suppose that a government agency is trying to decide between two pollution reduction policy options. Under the permit option, 100 pollution permits would be sold, each allowing emission of one unit of pollution. Firms would be forced to shut down if they produced any units of pollution for which they did not hold a permit. Under the pollution tax option, firms would be taxed $250 for each unit of pollution emitted. The regulated firms all currently pollute and face varying costs of pollution reduction, though all face increasing marginal costs of pollution reduction. Suppose the permit policy is adopted. A firm will wish to purchase its first permit if the price of that permit is less than or equal to:

Accepted Answer

A) the increase in costs associated with reducing its existing emissions by one unit. 
B) the lowest cost of eliminating one unit of pollution. 
C) the reduction in costs associated with increasing its emissions from zero to one unit. 
D) the average cost of eliminating one unit of pollution. 
A) the increase in costs associated with reducing its existing emissions by one unit. 
B) the lowest cost of eliminating one unit of pollution. 
C) the reduction in costs associated with increasing its emissions from zero to one unit. 
D) the average cost of eliminating one unit of pollution.

Question 19

According to the text, the allocation of scarce health care resources should be:

Accepted Answer

A) determined by length of time on a waiting list. 
B) based on the willingness to pay of the recipient of the care. 
C) based on the degree of suffering of the recipient of the care. 
D) determined by weighing marginal costs and marginal benefits. 
A) determined by length of time on a waiting list. 
B) based on the willingness to pay of the recipient of the care. 
C) based on the degree of suffering of the recipient of the care. 
D) determined by weighing marginal costs and marginal benefits.

Question 20

The major difficulty with using a tax on pollution instead of a fixed percentage reduction regulation is:

Accepted Answer

A) that firms would not pay the tax. 
B) that it would cause prices to rise. 
C) that it only works in theory. 
D) establishing the optimal size of the tax. 
A) that firms would not pay the tax. 
B) that it would cause prices to rise. 
C) that it only works in theory. 
D) establishing the optimal size of the tax.

According to the Manning study, people with $1,000-deductible health care coverage had:

In the United States, the emergence of the third-party payment system explains ______ of the increase in health care expenditures from 1940 to the present.

The most efficient distribution of pollution abatement is such that the:

The textbook cites a study comparing a group of consumers with first-dollar coverage to a group with a $1,000 deductible. The study results indicate that those with the deductible spent _ on health care and had __ health outcomes.

Suppose the figure below shows Luke's demand curve for check-ups along with the supply curve for check-ups. Relative to when Luke has to pay the entire marginal cost of each check-up, the loss of total economic surplus due to first-dollar medical insurance would be ______ per year.

It is socially optimal to hire an additional police officer if:

The graph below illustrates the marginal cost, marginal private benefit, and marginal social benefit of being vaccinated against a contagious childhood disease. Private market incentives would result in vaccinations per day, but the socially optimal number of vaccinations is per day.

The figure below shows Ava's demand curve for days in the hospital. The marginal cost of an additional day in the hospital is $200. If Ava had first-dollar medical insurance, then she would choose to stay ______ day(s) in the hospital.

Compared to patients covered by conventional health insurance plans, patients in HMOs might receive fewer medical services because HMOs:

According to the text, the allocation of scarce health care resources should be:

The major difficulty with using a tax on pollution instead of a fixed percentage reduction regulation is:

Thinking Like an Economist

Comparative Advantage

Supply and Demand

Elasticity

Demand

Perfectly Competitive Supply

Efficiency, Exchange, and the Invisible Hand in Action

Monopoly, Oligopoly, and Monopolistic Competition

Games and Strategic Behavior

Externalities and Property Rights

The Economics of Information

Labor Markets, Poverty, and Income Distribution

Public Goods and Tax Policy

Filters

Exam 13: The Environment, Health, and Safety

According to the Manning study, people with $1,000-deductible health care coverage had:

In the United States, the emergence of the third-party payment system explains ______ of the increase in health care expenditures from 1940 to the present.

The most efficient distribution of pollution abatement is such that the:

The textbook cites a study comparing a group of consumers with first-dollar coverage to a group with a $1,000 deductible. The study results indicate that those with the deductible spent _____ on health care and had ______ health outcomes.

Suppose the figure below shows Luke's demand curve for check-ups along with the supply curve for check-ups. Relative to when Luke has to pay the entire marginal cost of each check-up, the loss of total economic surplus due to first-dollar medical insurance would be ______ per year.

It is socially optimal to hire an additional police officer if:

The graph below illustrates the marginal cost, marginal private benefit, and marginal social benefit of being vaccinated against a contagious childhood disease. Private market incentives would result in ______ vaccinations per day, but the socially optimal number of vaccinations is ______ per day.

The figure below shows Ava's demand curve for days in the hospital. The marginal cost of an additional day in the hospital is $200. If Ava had first-dollar medical insurance, then she would choose to stay ______ day(s) in the hospital.

Compared to patients covered by conventional health insurance plans, patients in HMOs might receive fewer medical services because HMOs:

According to the text, the allocation of scarce health care resources should be:

The major difficulty with using a tax on pollution instead of a fixed percentage reduction regulation is:

Thinking Like an Economist

Comparative Advantage

Supply and Demand

Elasticity

Demand

Perfectly Competitive Supply

Efficiency, Exchange, and the Invisible Hand in Action

Monopoly, Oligopoly, and Monopolistic Competition

Games and Strategic Behavior

Externalities and Property Rights

The Economics of Information

Labor Markets, Poverty, and Income Distribution

Public Goods and Tax Policy

Filters

The textbook cites a study comparing a group of consumers with first-dollar coverage to a group with a $1,000 deductible. The study results indicate that those with the deductible spent _ on health care and had __ health outcomes.

The graph below illustrates the marginal cost, marginal private benefit, and marginal social benefit of being vaccinated against a contagious childhood disease. Private market incentives would result in vaccinations per day, but the socially optimal number of vaccinations is per day.