Question 1

A podiatrist fits about 45 patients per week with new orthotic shoe inserts. She finds that by reducing the price of a follow-up visit from $30 to $20, the number of patients returning for a follow-up visit increases from 15 to 25. Further reducing the price from $20 to $5 increases the number of follow-up visits to 30.

Accepted Answer

A)   Marginal revenue generated by the price reduction from $30 to $20 is -50.
B)   Marginal revenue generated by the price reduction from $20 to $5 is 350.
C)   In order to maximize profits, the best decision for this podiatrist is to reduce the price to $5, as this will result in the largest increase in demand.
D)   In order to maximize profits, the best decision for this podiatrist is to reduce the price to $20, as this will result in the largest total revenue.
E)   It is impossible to determine which price level would maximize profits for this podiatrist, as information about costs is not available. E

Question 2

The number of large US employers offering wellness programs to their employees has been steadily increasing over the years. Weight management, nutrition, fitness, and/or other wellness initiatives are now being offered by more than half of such employers. Use the concept of determinants of health to discuss the reasoning behind this trend. What do the employers expect to gain from this additional expense? Compare short-run versus long-run gains, private versus societal gains.

Accepted Answer

An opportunity to participate in wellness programs at no cost provides an incentive for many employees to lead a healthier lifestyle and to ultimately improve their health. Employers realize that many costly diseases are cheaper to prevent than to treat. As a result, employees' healthcare costs decline. Such a reduction may not be immediate though, as it takes on average about three years for employers to see cost-savings. Thus most of the gains are in the long-run. Also there is a certain probability that a part of those long-run savings will be transferred elsewhere if any of the now-healthier employees quit. Employer's gain may be less than societal gain in that case. As more and more employers implement such programs, however, the employers' concerns about transferring a portion of that gain to the society become less relevant.

Question 3

Costs to individuals such as pain, risk of death and time spent waiting for a procedure are considered _______ of a treatment to patients and provide no benefit to health care providers.

Accepted Answer

non-cash/non-monetary costs

Question 4

Professional evaluations are required to assess an individual patient's _______ for medical care while observations of _______ enable economists to determine a demand curve for medical care services.

Accepted Answer

The answer of Professional evaluations are required to assess an...

Question 5

Achieving economic efficiency in the market for hospital emergency room services differs from the perfectly competitive model because:

Accepted Answer

A)   making dynamic technological advances means that some current efficiency must be sacrificed.
B)   management of personnel and technological inputs must be made in the face of certainty about medical outcomes.
C)   issues of access to services only matter in the perfectly competitive model.
D)   demand for emergency room care is highly elastic.
E)   cost minimization efforts might conflict with broader societal goals of compassion and palliative care in the emergency room.

Question 6

Listed below are possible ways to improve the nation's health status, except

Accepted Answer

A)   increasing spending on medical care.
B)   relaxing the environmental pollution standards.
C)   paying for college education for children from low income families.
D)   incentivizing consumers to participate in wellness programs, such as weight-loss plans.
E)   provide government rebates to consumers for purchasing environmentally friendly vehicles.

Question 7

The production of health can be viewed as a function of several inputs. Empirical evidence suggests that

Accepted Answer

A)   medical care is the most important input to health outcomes in the past 150 years.
B)   environmental, heredity and per capita income are more important factors than medical care in improving health outcomes in the past 150 years.
C)   increased health care spending in the U.S. is possible without transferring scarce resources away from other areas.
D)   individuals have little control over personal choices such as exercising and avoiding smoking cigarettes.
E)   the demand for health is a derived demand.

Question 8

The need for medical care and the demand for medical care

Accepted Answer

A)   are never the same.
B)   depend on the perspective of physicians, patients, and third party payers.
C)   are the same when third party payers, such as insurance companies, agree to pay for the services doctors recommend.
D)   can both be limited by government action.
E)   can both be limited by increased income.

Question 9

Despite the empirical evidence that _______ is not the most important determinant of an individual's health, much of the focus of health economics studies is concentrated on _______ because individuals have very little control over other inputs to health such as _______.

Accepted Answer

The answer of Despite the empirical evidence that _______ is...

Question 10

Use the concepts of management and economic efficiency to explain why a hospital does not charge more for an MRI performed during an emergency room visit than it does for an MRI performed on a scheduled basis.

Accepted Answer

The answer of Use the concepts of management and economic...

Question 11

The Water-Diamonds Paradox is illustrated when water, which is essential for life, trades at a higher price than diamonds, which are not essential for life.

Accepted Answer

A) True 
 B)False

Question 12

Consider the following scenario. A pharmaceutical company has spent 230 million dollars developing and testing a new drug. The company projects the total revenue from sales to be about 850 million dollars over the course of three years after the drug approval by the Food and Drug Administration (FDA). The company is close to the completion of the research phase, when they learn that a competing drug has entered the market. Sales projections have been downgraded to 150 million dollars. An investment of an additional 9 million dollars would be required to complete the research and obtain the FDA approval, if the company decides to do so. The cost of producing actual pills, after the research phase is complete, will be close to zero and can be ignored for simplicity. The best advice for this company would be to abandon the production of this drug.

Accepted Answer

A) True 
 B)False

Question 13

Explain why purchasing an eye examination and a new pair of eyeglasses is much closer to the ceteris paribus assumptions of a perfectly competitive market than the purchase of an appendectomy.

Accepted Answer

The answer of Explain why purchasing an eye examination and...

Question 14

Consider the following scenario. A local pharmacy puts a popular brand of over-the-counter allergy medication, a 30-tablet pack, on sale at 30% off for a week. The quantity of that medication sold during that week (the number of 30-tablet packs), was 27% higher than the week before. The value of the price elasticity of demand for that allergy medication in this particular market is ___________ and demand can be considered _____________.

Accepted Answer

A)   9/10; inelastic
B)   10/9; inelastic
C)   3%; elastic
D)   27%; elastic
E)   57%; unit elastic

Question 15

A supply curve does all the following, except

Accepted Answer

A)   uses the Ceteris Paribus assumption.
B)   holds constant time, place, income, cost of inputs, cost of substitutes, and suppliers' expectations about future prices.
C)   shows quantity producers are willing and able to supply at each price.
D)   shows consumers' marginal benefit for each unit produced.
E)   shows suppliers' marginal cost of each unit produced.

Question 16

A physical therapy treatment can use a high tech machine to massage patients or a certified massage therapist. If the cost of the machine per unit of service is $100 and the cost of the therapist per unit of service is $50, then the health care provider faces a trade-off of _______ units of labor for each _______ unit of capital.

Accepted Answer

The answer of A physical therapy treatment can use a...

Question 17

If my dentist decides to lower the price of teeth whitening treatments, total sales (revenues) for treatments will go up if:

Accepted Answer

A)   excess supply for teeth whitening services exists.
B)   price elasticity is less than one.
C)   price elasticity is greater than one.
D)   excess demand for teeth whitening services exists.
E)   price elasticity of demand has changed.

Question 18

Price discrimination

Accepted Answer

A)   is an unethical way physicians charge wealthier patients more than other patients.
B)   occurs when the federal government gives fewer funds for Medicaid programs to higher income states.
C)   is easily practiced when goods and services can be purchased at lower prices and resold at higher prices.
D)   is only practiced by monopolists.

Question 19

The market demand curve for aspirin

Accepted Answer

A)   is measured at a specific time and place.
B)   is comprised of all the individual demand curves.
C)   is a marginal benefit curve.
D)   slopes downward because the benefit from the tenth aspirin is much less than the benefit from the first aspirin.
E)   all of the above.

Question 20

A person is willing to pay $50 per visit for physical therapy, but she pays $35 per visit. This person receives a consumer surplus of $85 per visit.

Accepted Answer

A) True 
 B)False

Exam 2: Demand and Supply

Costs to individuals such as pain, risk of death and time spent waiting for a procedure are considered _______ of a treatment to patients and provide no benefit to health care providers.

Professional evaluations are required to assess an individual patient's _ for medical care while observations of _ enable economists to determine a demand curve for medical care services.

Achieving economic efficiency in the market for hospital emergency room services differs from the perfectly competitive model because:

Listed below are possible ways to improve the nation's health status, except

The production of health can be viewed as a function of several inputs. Empirical evidence suggests that

The need for medical care and the demand for medical care

Despite the empirical evidence that ___ is not the most important determinant of an individual's health, much of the focus of health economics studies is concentrated on _ because individuals have very little control over other inputs to health such as _____.

Use the concepts of management and economic efficiency to explain why a hospital does not charge more for an MRI performed during an emergency room visit than it does for an MRI performed on a scheduled basis.

The Water-Diamonds Paradox is illustrated when water, which is essential for life, trades at a higher price than diamonds, which are not essential for life.

Explain why purchasing an eye examination and a new pair of eyeglasses is much closer to the ceteris paribus assumptions of a perfectly competitive market than the purchase of an appendectomy.

A supply curve does all the following, except

If my dentist decides to lower the price of teeth whitening treatments, total sales (revenues) for treatments will go up if:

Price discrimination

The market demand curve for aspirin

A person is willing to pay $50 per visit for physical therapy, but she pays $35 per visit. This person receives a consumer surplus of $85 per visit.