Deck 18: Aging, Social Security and Health Care

Question 1

The ratio of the number of people in the population aged 65 and older to the number of people aged 20 to 64 has risen in most of the developed countries as:

A)longevity has declined and the families have had many children.
B)the family planning laws have been relaxed.
C)birth rates have increased over time.
D)there has been an increased preference for male child.
E)longevity has increased and the families have had fewer children.

Answer 1

E

Question 2

Which of the following provides the best description of the Social Security System in the United States?

A)A trust fund into which every American citizen has voluntarily paid a certain amount of money each year
B)Funds that were deposited in a trust fund and allowed to accumulate interest-free for use in future years
C)Funds that were deposited in a trust fund and allowed to accumulate at market rates of interest for general use in future years
D)Funds that were deposited in a trust fund and allowed to accumulate at market rates of interest for the use in future years only by the individuals who voluntarily deposited the funds
E)A transfer payment that taxes the working population today and pays benefits for current retirees from the proceeds of that tax.

Answer 2

E

Question 3

If social security is privatized:

A)the contributors would receive fixed and defined retirement benefits.
B)the contributors would earn on the basis of pay-as-you-go system.
C)individuals would be paid on the basis of their incomes.
D)individuals would earn returns on their investments made out of their savings.
E)individuals would not be required to pay taxes and hence would receive no benefit.

Answer 3

D

Question 4

The ratio of workers to social security beneficiaries has declined from 16.5 in 1950 to about 3 in 2010 and is expected to decline to 2 by 2030.This trend indicates that:

A)the surplus generated from the social security fund is going to increase over time.
B)the revenue generated by the government from the social taxes is going to decline by 2030.
C)the strength of the U.S.labor force will shrink over time.
D)the social security contributions will fall short of the social security payments over time.
E)the number of retirees will gradually decline and the youth employment in the economy will increase.

Question 5

One of the myths about social security is that the government runs a surplus in the Social Security Trust Fund.Which of the following debunks this myth?

A)The number of people retiring every year has steadily declined since 1950.
B)There are no trust funds and the proceeds from the social security taxes are used to purchase Treasury bonds.
C)The number of people joining the workforce is increasing over time.
D)The social security taxes has been increased by the government since 1990.
E)The retirees receive much less than the amount paid by the current workers under the pay-as-you go system.

Question 6

The elderly support ratio recorded by the U.S.Bureau of the Census in 1985 is expected to rise post 2005 because:

A)a large number of people born between 1946 and 1961 would still be in the labor force.
B)the cost of medical care would increase over time.
C)the availability of medical care would decline in future.
D)a large working-age population would retire.
E)population of every economy would continue to rise.

Question 7

A major concern about social security is that:

A)individuals do not pay their contributions regularly into the social security fund.
B)the money deposited by the contributors are invested in real estate market.
C)the amount deposited in the social security fund is often inadequate and hence the amount received in retirement benefits is also negligible and insufficient to support a decent life.
D)retirees have to undergo long drawn procedures to redeem their retirement benefits.
E)the amount paid into the social security system by an individual is far less than the amount received by him in retirement benefits.

Question 8

The money raised from the social security taxes is used:

A)to invest in foreign bonds.
B)to invest in domestic interest bearing assets.
C)to meet recurring government expenditures.
D)to fund the unemployment insurance program.
E)to fund the scholarship programs in foreign universities.

Question 9

One proposal for solving the social security problem is privatization.This means:

A)refusing to provide retirement benefits,thereby forcing people to use private savings.
B)providing retirement benefits only to those who had worked for a private firm.
C)providing retirement benefits only to those who also save privately.
D)allowing participants to choose how their tax funds are to be invested.
E)preventing participants from paying taxes on their retirement income.

Question 10

Which of the following acts specifies the tax contributions of the employer and the employee for the social security program in the U.S.?

A)The National Insurance Act
B)The Child Support,Pension,and Social Security Act
C)The Social Security Administration Act
D)The Cost-of-Living Allowance Act
E)The Federal Insurance Contributions Act

Question 11

Privatization of the social security system would lead to which of the following adverse outcomes?

A)The private companies would make a lot of profit and deprive the investors of their legitimate returns.
B)Many people would invest irrationally and end up earning nothing.
C)The amount of benefit received would drastically fall as the private firms do not have social obligations.
D)It might lead to accumulation of substantial black money.
E)There would be an increase in government borrowing and debt creation.

Question 12

The social security system in the United States,which covers both social security and hospital insurance is financed by a:

A)value added tax.
B)payroll tax.
C)insurance tax.
D)property tax.
E)mortgage registry tax.

Question 13

The demand for unskilled workers is highly price elastic.This means that a tax imposed partly on unskilled workers and partly on their employers:

A)will be paid primarily by the employers.
B)will be paid primarily by the employees.
C)will be equally paid by employers and employees.
D)will be totally passed on to consumers.
E)will be paid only by the employers.

Question 14

Which of the following is a myth about social security?

A)The money deposited by the depositors belong to the government.
B)The social security fund is economically unviable.
C)There can be deficit in the Social Security Trust Fund.
D)The social security fund benefits only the low income earners and unemployed youth.
E)Social security ensures that only the elderly poor are cared for.

Question 15

_____ taxes have risen more rapidly in the past two decades than any other tax.

A)Social security
B)Corporate
C)Property
D)Sales
E)Income

Question 16

Which of the following is the most controversial proposal suggested for making the system of social security more efficient?

A)Privatizing the system of social security
B)Raising the eligibility age from 75 years to 85 years
C)Limiting the disbursement of retirement benefits to the backward section of the population only
D)Paying social security benefits to everyone irrespective of their levels of income
E)Reducing the amount disbursed in retirement benefits

Question 17

Which of the following factors are responsible for the growth of older population in the developed countries?

A)High birth and death rates
B)High birth rate and decreased life expectancy
C)Low birth rates and increased life expectancy
D)Low birth rates and high death rates.
E)High birth rates and increased life expectancy.

Question 18

Which of the following would not reduce the problem with the social security system?

A)Reducing the benefits paid to the retirees
B)Paying retirement benefits only to those without any alternative source of income
C)Increasing the minimum age for receiving retirement benefits
D)Privatizing the system by allowing individuals to decide how to invest their social security taxes
E)Including everyone in the Congressional retirement program

Question 19

The aging of the American population has brought to the forefront of the nation the concern that social security is no longer a viable option for future retirees and that the financial viability of the system depends on:

A)how much each retiree has contributed over his or her lifetime to his or her individual social security account.
B)the ratio of those working to those retired.
C)the ratio of the total earning of an individual over his lifetime to the number of his service years.
D)the interest rate in effect at the time a contributor first began to contribute to his or her individual social security account.
E)the interest rate in effect over the entire course of time that a contributor has paid into the fund.

Question 20

One of the major impacts of the aging of the population is:

A)increase in the production of necessary goods in the economy.
B)increase in government revenue generation.
C)increase in the expenditure on health care.
D)addition to the labor force.
E)decrease in transfer payments made by the government.

Question 21

The figure given below shows the demand (D) and supply (S₁ and S₂) curves of medical care. Figure 18.2
Refer to Figure 18.1.The possible reason behind the shift of the supply curve from S₁ to S₂ is:

A)increased preference for herbal medicine among the people.
B)increase in the marginal cost of producing medical care.
C)increase in the per capita income of the people.
D)economies of scale being experienced in the production of medical care.
E)greater health consciousness among the people.

Question 22

Which of the following can increase the price of medical care even if the demand for medical care remains constant?

A)Decrease in the cost of medical care
B)Availability of high end technology in modern medical care
C)Increase in the cost of medical care
D)General improvement in the standard of living
E)An increase in preference for herbal medicines among people

Question 23

The figure given below shows the demand (D₁ and D₂) and supply (S) curves of medical care. Figure 18.1
Refer to Figure 18.1.One possible reason for the shift of the demand curve from D₁ to D₂ is the:

A)increase in the cost of producing new drugs.
B)restriction imposed by the government on the sale of new drugs.
C)emergence of Medicare and Medicaid programs of the U.S.government.
D)economies of scale experienced while producing medical care.
E)decrease in the cost of producing medical care.

Question 24

Medicare is a federal program that provides health care for:

A)women.
B)victims of AIDS,child abuse,and drug addiction.
C)the elderly and disabled.
D)the homeless.
E)poor families who could not otherwise obtain health care.

Question 25

Which of the following has led to increased cost of health services?

A)The demand for health services have declined over the time.
B)The demand for health services has increased relative to its supply.
C)Supply of health services have increased relative to its demand.
D)Both demand and supply of health services have increased at the same pace.
E)The government has invested heavily on health infrastructure.

Question 26

The American Medical Association helps increase:

A)price competition among local physicians in the same area.
B)the ability of each physician to act as a local monopoly.
C)freedom of physicians to advertise.
D)consumers' ability to obtain complete information about prices or professional quality.
E)the ability of new,entering physicians to compete with established ones by charging lower prices.

Question 27

The figure given below represents demand for and supply of hospital beds in Anytown,U.S.A.,as shown by curves D and S₁ in the following figure.If the hospital receives permission to expand,its new supply curve will be S₂.Price level P₁ is the fixed prospective payment reimbursement rate paid by Medicare to the hospital,regardless of actual cost. Figure 18.3
According to Figure 18.3,the surplus of beds caused by the fixed reimbursement rate,before the hospital expansion,is the difference between _____ and _____.

A)Q₂; Q₁
B)Q₄; Q₁
C)Q₄; Q₂
D)Q₃; Q₁
E)Q₃; Q₂

Question 28

The increase in physicians' fees in the U.S.is most likely to have resulted from a(n):

A)decline of the supply of doctors.
B)decline in the number of hospitals.
C)increase in emigration from the U.S.
D)increase in the supply of doctors.
E)increase in the U.S.population.

Question 29

_____ account for a majority of the health care expenditure in the United States.

A)Physician's services
B)Prescription drugs
C)Personal health care services
D)Hospital services
E)Medical equipments at retail stores

Question 30

The bulk of the cost of hospital care is borne by third-parties.Such third-parties are:

A)relatives and friends.
B)financial institutions.
C)insurance companies.
D)voluntary organizations.
E)employers.

Question 31

What is the effect of the aging population on the price of health care?

A)The supply of health care rises,but the price remains constant.
B)The demand for health care falls,and the price declines.
C)The demand for health care rises,and the price increases.
D)The supply of health care rises,and the price increases.
E)The demand for health care rises,but price remains constant.

Question 32

Which of the following statements about Medicare is correct?

A)Medicare covers the entire cost of hospital or nursing home care of the old people.
B)Medicare had emerged in the 1950s.
C)Medicare covers the first 100 days of hospital or nursing home care of the old people.
D)Medicare is available on the basis of need.
E)Medicare is funded by property taxes.

Question 33

Empirical evidence suggests that the aging of the population stimulates the demand for health care.In the light of this observation,identify the correct statement.

A)The aged population accounts for around eleven percent of hospital expenditures.
B)Per capita spending on personal health care for those 85 years of age or over is less than that for people of 60-65 years.
C)The per capita consumption of nursing home care by people between 60-65 years is twice that of people of age 85 years or more.
D)About sixty percent of the expenditure on nursing home care are for people aged between 30 and 40 years.
E)About ninety percent of the expenditure on nursing home care are for people aged 65 years or over.

Question 34

The high cost of hospital care in the U.S.is primarily attributable to:

A)the way in which capital purchases are financed.
B)the increased occupancy rate in the hospitals.
C)the lack of sufficient hospital beds.
D)the greater availability of physicians.
E)the increased malpractice by the physicians.

Question 35

"Rising health care costs might be considered a vicious circle.As health care costs rise,people want more,and this drives up demand,which in turn increases health care costs." What is wrong with this statement?

A)If prices rise,people do not demand more.
B)If costs rise,people are not willing and able to purchase more if they have to pay for the health care.
C)If an increase in demand for health care is matched with an equal increase in supply,the cost of health care remains unaffected.
D)Demand does not rise simply because health care costs rise.
E)Health care costs do not rise simply because demand increases.

Question 36

Which of the following has resulted from the payment system laid down by the American Medical Association?

A)The payment system has discouraged specialization among workers.
B)The cost of doing business for the physicians declined due to increased competition.
C)The cost of malpractice insurance has declined.
D)The quantity of medical equipments purchased by the physicians has increased.
E)The number of tests ordered by physicians has decreased.

Question 37

Which of the following is a consequence of government programs like Medicare and Medicaid?

A)Increased cost of medical care
B)Increased price elasticity of demand for medical care
C)Increase in the the number of private health insurance companies
D)Increased demand for health care
E)Increase in the marginal cost of medical care

Question 38

Physicians' fees have risen rapidly in the face of an expanding supply of physicians in the last two decades.Which of the following reasons best explains this phenomenon?

A)Restrictions on advertising enable established physicians to keep new,entering physicians from competing for their customers.
B)Fees charged by physicians are fixed by the government.
C)Consumers are able to obtain complete information about fees or professional qualities of the physicians.
D)Restrictions on physicians' freedom to relocate within certain geographic boundaries have led to price fixing within the medical profession.
E)The demand for physicians' services has steadily declined over the past three decades.

Question 39

Which of the following is a joint federal and state health program that pays for the health care of poor families and disabled?

A)Medicure
B)Medicare
C)Mediaid
D)Medicaid
E)Mediclaim

Question 40

The American Medical Association's payment system is an example of a:

A)price floor.
B)price ceiling.
C)tariff.
D)barrier to entry.
E)quota.

Question 41

Why are black markets for human organs less efficient than free markets?

A)Prices are lower in black markets than in free markets.
B)Traders are discreet in free markets.
C)There are a more traders in the black market compared to the free markets.
D)Buyers cannot meet openly with the sellers in black market as they can in free markets.
E)There is a steady supply of human organs in the free market while the supply in black market is unpredictable.

Question 42

Health care can be regarded as a(n):

A)normal good.
B)Giffen good.
C)scarce good.
D)luxury good.
E)inferior good.

Question 43

A physician who prescribes unnecessary tests to her patients is most likely defending:

A)his patients against chronic diseases.
B)the reputation of all physicians.
C)the general health of the community.
D)the hospital's reputation and goodwill.
E)himself or herself against the possibility of a malpractice suit.

Question 44

The following figure shows the demand (D) and supply (S) curves of human organs Figure 18.5
In Figure 18.5,the equilibrium quantity of human organs in the market is:

A)Q₅.
B)Q₂.
C)Q₃.
D)Q₁.
E)Q₄.

Question 45

The figure given below represents demand for and supply of hospital beds in Anytown,U.S.A.,as shown by curves D and S₁ in the following figure.If the hospital receives permission to expand,its new supply curve will be S₂.Price level P₁ is the fixed prospective payment reimbursement rate paid by Medicare to the hospital,regardless of actual cost. Figure 18.3
According to Figure 18.3,given the existing demand for its beds,after the hospital completes its expansion it will maximize its occupancy rate by charging a price level:

A)P₁.
B)P₂.
C)P₃.
D)(P₁+ P₂)/2.
E)P₃-P₁.

Question 46

Which of the following facts is true of medicare?

A)It has caused the price elasticity of the demand for health care to increase.
B)It is financed by state excise and sales taxes and is available on the basis of need and not disability.
C)It covers the cost of first 100 days of hospital treatment provided only to the unemployed people.
D)It covers the cost of the first 100 days of hospital or nursing home care for the elderly.
E)They are subsidies given by the U.S.government to private health insurance companies.

Question 47

Why is health care considered to be an economic good and is subject to the laws of economics?

A)Health care at times can be obtained even without paying a price for it.
B)Health care is easily available.
C)The supply of health care is greater than its demand.
D)Health care is a social good available at subsidized rates to the poor.
E)Supply of health care is scarce compared to its demand.

Question 48

In the context of the hospitals in the United States,which of the following statements is correct?

A)In the past 20 years,the number of beds per hospital declined by 11 percent.
B)In the past 20 years,inpatient days increased by 43 percent.
C)The current occupancy rate in the hospitals is around 66 percent.
D)In the past 20 years,the length of stay in the hospitals has increased by 24 percent.
E)In the past 20 years,the occupancy rates have increased by nearly 13 percent.

Question 49

Which of the following statements is true of the market for prescription drugs in the U.S.?

A)The FDA encourages the entry of new drugs in the market.
B)The time required to bring a new drug to the market has declined over time.
C)The drug manufacturing firms enjoy economies of scale,hence the cost of producing new drugs have declined.
D)More than 60 percent of the biopharmaceutical products approved in the U.S.originated either in Europe or in Japan.
E)The latest estimate of the cost to develop a new drug and bring it to market exceeds $800 million.

Question 50

People who oppose the establishment of an open market in human organs justify their view on the ground that:

A)it would yield huge profits to the privately owned medical care centers.
B)it would lead to a chronic organ shortage.
C)it would result in the exploitation of the poor.
D)it would induce people to fritter away money earned through the sale of organs.
E)although the poor people are in greater need of the organs,yet they would not be able to afford them because of their high price.

Question 51

The following figure shows the demand (D) and supply (S) curves of human organs Figure 18.5
Which of the following factors might have led to a fall in the price of human organs from P₂ to P₃ in Figure 18.5?

A)A decline in supply of human organs in the black market
B)An increase in demand for human organs
C)Increased supply of alternatives to organs created by technological changes
D)A restriction imposed by the government on trading in human organs
E)Reduced motivation among the donors to donate their organs

Question 52

The following figure shows the demand (D) and supply (S) curves of human organs Figure 18.5
In Figure 18.5,if the price for human organs falls to P₃:

A)there will be a surplus of human organs by Q₅ - Q₂.
B)there will be a shortage of human organs by Q_{4 -} Q₃.
C)there will be a shortage of human organs by Q_{5 -} Q₃.
D)there will be a surplus of human organs by Q_{4 -} Q₃.
E)there will be a shortage of human organs by Q_{5 -} Q₁.

Question 53

Which of the following reasons justifies the increase in the expenditure on prescription drugs in the U.S.?

A)Lack of sufficient investment in research and development of new drugs
B)Proper functioning of the Medicare and Medicaid programs
C)Insufficient supply of prescription drugs leading to a shortage
D)Increasing returns to scale experienced by the drug manufacturers
E)Decrease in the time required to introduce a new drug into the market

Question 54

Which of the following is true of the demand curve for medical care?

A)The demand curve for medical care is infinitely elastic.
B)The demand curve for medical care is relatively inelastic.
C)The demand curve for medical care shifts upward due to an increase in the price of medical care.
D)The demand curve for medical care is relatively flatter than the supply curve of medical care.
E)The demand curve for medical care is horizontal at the equilibrium price of medical care.

Question 55

Empirical evidences suggest that the expenditure on prescription drugs grew by an annual average of 15 percent since 1995.In the light of this observation which of the following statements is true?

A)The restrictions imposed by the government on drug manufacturing firms were relaxed
B)Medicare has increased the ability to buy drugs
C)FDA has been easily granting permission to drug manufacturing companies to sell their new drugs.
D)Cost of producing new drugs have declined
E)Discovery of expensive new drugs reduced the demand for prescription drugs.

Question 56

The figure given below represents demand for and supply of hospital beds in Anytown,U.S.A.,as shown by curves D and S₁ in the following figure.If the hospital receives permission to expand,its new supply curve will be S₂.Price level P₁ is the fixed prospective payment reimbursement rate paid by Medicare to the hospital,regardless of actual cost. Figure 18.3
According to Figure 18.3,the surplus of beds caused by the fixed reimbursement rate,after the expansion of the hospital is the difference between _____ and _____.

A)Q₅; Q₁
B)Q₅; Q₂
C)Q₄; Q₂
D)Q₃; Q₂
E)Q₃; Q₁

Question 57

The figure given below represents demand for and supply of hospital beds in Anytown,U.S.A.,as shown by curves D and S₁ in the following figure.If the hospital receives permission to expand,its new supply curve will be S₂.Price level P₁ is the fixed prospective payment reimbursement rate paid by Medicare to the hospital,regardless of actual cost. Figure 18.3
Based on the information given in Figure 18.3,in order to increase its occupancy rate prior to the expansion,this hospital should:

A)discourage comparison-shopping by prospective patients.
B)give financial incentives to doctors without privileges to admit patients.
C)increase the number of beds.
D)eliminate its advertising budget.
E)lower its price for certain cost-effective medical procedures.

Question 58

The figure below shows the demand (AD) and supply (SS₁) curves of medical care. Figure 18.4
In Figure 18.4,which of the following regions on the graph represents those people who are not willing and able to pay the price P₁ for availing medical care?

A)AE
B)SE
C)AD
D)ED
E)ES₁

Question 59

The figure below shows the demand (AD) and supply (SS₁) curves of medical care. Figure 18.4
Refer to Figure 18.4.If the third-party system now induces those people to avail medical care who were earlier not willing to avail it,the demand curve AD would:

A)shift inward.
B)become perfectly elastic.
C)become vertical.
D)remain unchanged.
E)shift outward.

Question 60

Why does the demand curve for human organs tend to be relatively price inelastic?

A)The demand for human organs change substantially with change in price.
B)The people in demand of the organs are ready to pay almost anything to get the organs.
C)The supply of human organs tend to be greater than the demand for the organs.
D)There are a large number of people in the market for human organs who are in need of them but cannot afford them.
E)There is a presence of strong parallel or underground market for the human organs.

Question 61

If the ratio of those working to those retired increases it implies that "The World is Aging."

Question 62

Why didn't the supply of medical care increase in the United States in spite of increase in its price?

A)Pharmacists were earlier restricted to dispense drugs but now they are allowed to do so
B)New drugs can easily enter the U.S.market as government regulations are lax
C)The Medicare system restricts the movement of resources from one part of the market to another
D)Relaxation of the restrictions imposed by the U.S.government earlier
E)The market for medical care is a free and unregulated market.

Question 63

The results of privatizing the social security system has been negative at large in most of the economies.

Question 64

The American Medical Association restricts advertising by the physicians,thus it can be partly held responsible for the inability of consumers to obtain complete information about prices or professional quality of physicians.

Question 65

Medical care in the United States is not only expensive but also technologically backward than other nations.

Question 66

Medicare helps only the neediest people,including many elderly people whose Medicaid benefits have run out.

Question 67

The system of adjusting social security benefits annually as the cost of living increases in the United States has been a result of intellectual foresight by the American economists.

Question 68

The social security tax proceeds are often used to purchase government bonds.

Question 69

The existence of new drugs reduces the demand for drugs as they are highly expensive.

Question 70

Direct payments for medical care consist of out-of-pocket payments made by individuals,copayments,and deductibles required by many third-party payers.

Question 71

The new technologies developed in the field of medical care are cost-increasing innovations and because costs are not paid by the users,the increased technology increases demand.

Question 72

Demand for medical care remaining constant,if the supply of medical care is decreased,the price of medical care increases.

Question 73

The U.S.government spends more on social security than it spends on national defense.

Question 74

It has been argued that a worker would receive a greater return if they invest in prospective ventures than what they would earn from social security.

Question 75

The American Medical Association encourages the young physicians to advertise to attract more patients.

Question 76

As per the payment system laid down by the American Medical Association the physicians are reimbursed on the basis of their speciality.

Question 77

The social security system in Chile is partially privatized as a part of the taxes is used to run government expenses and the rest can be invested by the worker.

Question 78

The social security taxes that the working population pays today are used to provide benefits for current retirees.

Question 79

As three-quarters of the world's population resides in the developing countries,these areas contain around 80 percent of the world's elderly population.

Question 80

One way in which the U.S.government can reduce the deficit in the social security fund is by lowering the social security tax rate.