Question 1

In 2017, health care's share of gross domestic product in the United States

Accepted Answer

A) had returned to its 1995 level. 
B) had declined to only 6.5 percent. 
C) was about three times as high as it was in 1965. 
D) reached a level of 75 percent.

Question 2

In the United States, out-of-pocket spending on health care is about ________ percent of all health care spending.

Accepted Answer

A) 2 
B) 10 
C) 33 
D) 48

Question 3

Health insurance plans which typically reimburse doctors mainly by paying a flat fee per patient are known as

Accepted Answer

A) fee-for-service plans. 
B) preferred provider organizations. 
C) single-payer health care systems. 
D) health maintenance organizations.

Question 4

College education tends to result in a negative externality because the recipient does not receive the full benefit of the education.

Accepted Answer

A) True 
 B)False

Question 5

Figure 7-1
  
Figure 7-1 represents the market for vaccinations. Vaccinations are considered a benefit to society, and the figure shows both the marginal private benefit and the marginal social benefit from vaccinations.
-Refer to Figure 7-1.Marginal social benefit is represented by which curve?

Accepted Answer

A) D₁ 
B) D₂ 
C) Supply 
D) All of the above represent marginal social benefit.

Question 6

Which of the following is not an advantage of risk pooling?

Accepted Answer

A) By insuring large groups as opposed to individuals, health insurance providers reduce adverse selection. 
B) It gives very sick people in the group the same access to health care and to pay the same premiums as healthy individuals. 
C) It is easier for an insurance company to estimate the average number of claims likely to be filed under a group policy than it is to predict the number of claims likely to be filed under an individual policy. 
D) Individuals who are insured and therefore do not have to pay the full cost of health care services may be inclined to over-use those services.

Question 7

Figure 7-1
  
Figure 7-1 represents the market for vaccinations. Vaccinations are considered a benefit to society, and the figure shows both the marginal private benefit and the marginal social benefit from vaccinations.
-Refer to Figure 7-1.Marginal private benefit is represented by which curve?

Accepted Answer

A) D₁ 
B) D₂ 
C) Supply 
D) All of the above represent marginal private benefit.

Question 8

Figure 7-2
  
Figure 7-2 represents the market for medical services with and without insurance, and the effect of a third-party payer system on the demand for medical services.
-Refer to Figure 7-2.With insurance and a third-party payer system, what price do consumers pay for medical services?

Accepted Answer

A) $25 
B) $40 
C) $55 
D) >$55

Question 9

Article Summary
An Organisation for Economic Co-operation and Development (OECD) report  states that administration costs for health care in the United States are the highest in the developed world, accounting for over 8 percent of spending in the health care sector, compared to a global average of about 3 percent. According to the report, expensive surgeries, high pharmaceutical costs, and corrupt practices increased global health care costs, and poor coordination between health care providers, duplication of tasks, and excessive time spent on paperwork all contributed to higher administrative costs. The report also noted that administrative costs are generally lower under government-managed health care systems than with private insurance, but governments could still significantly cut spending and improve patients' health.
Source: Alanna Petroff, "U.S. health care admin costs are double the average," money.cnn.com, January 11 2017.
-For a given level of compensation, the ________ a firm pays for your health insurance, the ________ it will pay you in wages.

Accepted Answer

A) more; more 
B) less; less 
C) less; more 
D) Health insurance payments and wages are not related.

Question 10

What is the principal-agent problem?

Accepted Answer

The answer of What is the principal-agent problem?...

Question 11

In addition to covering the costs of unpredictable events, health insurance typically covers many planned expenses, such as routine checkups, annual physicals, and the cost of vaccinations.Because of this, health insurance

Accepted Answer

A) discourages overuse of health care services. 
B) encourages overuse of health care services. 
C) generates an efficient quantity of health care services. 
D) is not accepted by most doctors and hospitals.

Question 12

Automobile insurance companies have a problem with people who buy insurance and then drive recklessly or take less care to avoid losses after being insured.In other words, the automobile insurance market is subject to

Accepted Answer

A) asymmetric information. 
B) market signaling. 
C) moral hazard. 
D) adverse selection.

Question 13

Which of the following parties is likely to have the most information about the health of an individual who is trying to purchase a health insurance policy?

Accepted Answer

A) the company that issues the health insurance policy 
B) the individual who is applying for the health insurance policy 
C) the employer of the individual who is trying to purchase the health insurance policy 
D) All parties in the health insurance market have access to the same level of information.

Question 14

What is moral hazard?

Accepted Answer

A) It refers to the private, self-interested actions that people pursue, which when taken collectively leads to a loss in economic surplus. 
B) It refers to the actions people take after they have entered into a transaction that makes the other party to the transaction worse off. 
C) It refers to the situation in which one party to a transaction takes advantage of knowing more than the other party to the transaction. 
D) It refers to the actions people take before they enter into a transaction so as to mislead the other party to the transaction.

Question 15

A doctor pursuing his own interests rather than the interests of his patients is an example of the principal-agent problem.

Accepted Answer

A) True 
 B)False

Question 16

The aging of the U.S.population has tended to ________ spending on health care, and the development of new drugs and medical equipment has tended to ________ spending on health care.

Accepted Answer

A) increase; increase 
B) increase; decrease 
C) decrease; increase 
D) decrease; decrease

Question 17

Adverse selection is a situation in which one party to a transaction takes advantage of knowing more than the other party to the transaction.

Accepted Answer

A) True 
 B)False

Question 18

Typically, the higher the level of income per person in a country, the higher the level of spending per person on health care.This relationship between income and spending indicates that health care is a

Accepted Answer

A) normal good. 
B) inferior good. 
C) luxury. 
D) necessity.

Question 19

Figure 7-1
  
Figure 7-1 represents the market for vaccinations. Vaccinations are considered a benefit to society, and the figure shows both the marginal private benefit and the marginal social benefit from vaccinations.
-Refer to Figure 7-1.The market equilibrium quantity is ________ thousand vaccinations.

Accepted Answer

A) 100 
B) 200 
C) 300 
D) >300

Question 20

A key difficulty facing insurance companies is that people know more about their health than do insurance companies.What is this phenomenon called?

Accepted Answer

A) moral hazard 
B) economic irrationality 
C) asymmetric information 
D) adverse selection

Exam 7: The Economics of Health Care

In 2017, health care's share of gross domestic product in the United States

In the United States, out-of-pocket spending on health care is about ________ percent of all health care spending.

Health insurance plans which typically reimburse doctors mainly by paying a flat fee per patient are known as

College education tends to result in a negative externality because the recipient does not receive the full benefit of the education.

Figure 7-1 Figure 7-1 represents the market for vaccinations. Vaccinations are considered a benefit to society, and the figure shows both the marginal private benefit and the marginal social benefit from vaccinations. -Refer to Figure 7-1.Marginal social benefit is represented by which curve?

Which of the following is not an advantage of risk pooling?

Figure 7-1 Figure 7-1 represents the market for vaccinations. Vaccinations are considered a benefit to society, and the figure shows both the marginal private benefit and the marginal social benefit from vaccinations. -Refer to Figure 7-1.Marginal private benefit is represented by which curve?

Figure 7-2 Figure 7-2 represents the market for medical services with and without insurance, and the effect of a third-party payer system on the demand for medical services. -Refer to Figure 7-2.With insurance and a third-party payer system, what price do consumers pay for medical services?

What is the principal-agent problem?

In addition to covering the costs of unpredictable events, health insurance typically covers many planned expenses, such as routine checkups, annual physicals, and the cost of vaccinations.Because of this, health insurance

Automobile insurance companies have a problem with people who buy insurance and then drive recklessly or take less care to avoid losses after being insured.In other words, the automobile insurance market is subject to

Which of the following parties is likely to have the most information about the health of an individual who is trying to purchase a health insurance policy?

What is moral hazard?

A doctor pursuing his own interests rather than the interests of his patients is an example of the principal-agent problem.

The aging of the U.S.population has tended to spending on health care, and the development of new drugs and medical equipment has tended to spending on health care.

Adverse selection is a situation in which one party to a transaction takes advantage of knowing more than the other party to the transaction.

Typically, the higher the level of income per person in a country, the higher the level of spending per person on health care.This relationship between income and spending indicates that health care is a

A key difficulty facing insurance companies is that people know more about their health than do insurance companies.What is this phenomenon called?