Question 1

Which of the following is not part of the "individual mandate" provision of the Patient Protection and Affordable Care Act (ACA)?

Accepted Answer

A)  Individuals are allowed to opt out of the insurance program if they can prove they have no serious health issues. 
B)  In 2017, fines for not having health insurance are the greater of $695 per person or 2.5 percent of income. 
C)  Individuals who do not acquire health insurance will be subject to a fine. 
D)  With limited exceptions, every resident of the United States is required to have health insurance that meets certain basic requirements. 
A)  Individuals are allowed to opt out of the insurance program if they can prove they have no serious health issues. 
B)  In 2017, fines for not having health insurance are the greater of $695 per person or 2.5 percent of income. 
C)  Individuals who do not acquire health insurance will be subject to a fine. 
D)  With limited exceptions, every resident of the United States is required to have health insurance that meets certain basic requirements.

Question 2

Figure 7-5   Figure 7-5 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 7-5. The efficient price of medical services is

Accepted Answer

A)  $40. 
B)  $55. 
C)  $65. 
D)  > $65. 
A)  $40. 
B)  $55. 
C)  $65. 
D)  > $65.

Question 3

The largest government-run health care system in the world, with 1.4 million employees, is in

Accepted Answer

A)  Canada. 
B)  Japan. 
C)  the United Kingdom. 
D)  the United States. 
A)  Canada. 
B)  Japan. 
C)  the United Kingdom. 
D)  the United States.

Question 4

In the United States in 2016, the percentage of people who received health insurance through their employer was about

Accepted Answer

A)  15%. 
B)  36%. 
C)  49%. 
D)  83%. 
A)  15%. 
B)  36%. 
C)  49%. 
D)  83%.

Question 5

In the classic 1944 movie Double Indemnity, Barbara Stanwyck plays Phyllis Dietrichson, a woman who has devised a scheme with insurance agent Walter Neff, played by Fred MacMurray, to trick her husband into signing a life insurance policy and then kill him to collect the proceeds of the policy. In this scheme to murder her husband, Phyllis and her partner Walter took advantage of the husband when getting him to sign the life insurance policy, a situation which describes

Accepted Answer

A)  rational ignorance. 
B)  the principal-agent problem. 
C)  adverse selection. 
D)  moral hazard. 
A)  rational ignorance. 
B)  the principal-agent problem. 
C)  adverse selection. 
D)  moral hazard.

Question 6

Consider a used car market in which half the cars are good and half are bad (lemons). If buyers are rational, the prices being offered for used cars will result in

Accepted Answer

A)  an equal proportion of a good cars and lemons being sold in an efficient market. 
B)  a larger proportion of good cars being sold and consequently, consumer surplus is increased. 
C)  a larger proportion of lemons being sold and consequently, producer surplus is increased. 
D)  an equal proportion of good cars and lemons being sold in an inefficient market. 
A)  an equal proportion of a good cars and lemons being sold in an efficient market. 
B)  a larger proportion of good cars being sold and consequently, consumer surplus is increased. 
C)  a larger proportion of lemons being sold and consequently, producer surplus is increased. 
D)  an equal proportion of good cars and lemons being sold in an inefficient market.

Question 7

As a percentage of GDP, health care spending on Medicare and Medicaid is expected to double over the next 40 years unless health care costs begin to grow at a slower rate.

Accepted Answer

A) True 
 B)False

Question 8

Vaccinations tend to result in a negative externality.

Accepted Answer

A) True 
 B)False

Question 9

Suppose that in a market for used cars, there are good used cars and bad used cars (lemons). Consumers are willing to pay as much as $6,000 for a good used car but only $1,000 for a lemon. Sellers of good used cars value their cars at $5,000 each and sellers of lemons value their cars at $800 each. Buyers cannot tell if a used car is reliable or is a lemon. Based on this information, what is the likely outcome in the market for used cars?

Accepted Answer

A)  Sellers of good used cars will drop out of the market. 
B)  Sellers of good used cars will incur losses. 
C)  Sellers of lemons will drop out of the market. 
D)  Used cars will sell for $3,000. 
A)  Sellers of good used cars will drop out of the market. 
B)  Sellers of good used cars will incur losses. 
C)  Sellers of lemons will drop out of the market. 
D)  Used cars will sell for $3,000.

Question 10

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. 
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 11

An increase in the number of medical procedures performed in doctor's offices rather than in hospital settings will tend to shift the ________ curve for medical services to the ________.

Accepted Answer

A)  demand; left 
B)  demand; right 
C)  supply; left 
D)  supply; right 
A)  demand; left 
B)  demand; right 
C)  supply; left 
D)  supply; right

Question 12

How do adverse selection and moral hazard affect the market for insurance?

Accepted Answer

Both adverse selection and moral hazard

Question 13

Changes in the health of the average person are an important indicator of changes in the standard of living.

Accepted Answer

A) True 
 B)False

Question 14

Why is the study of asymmetric information associated with the market for "lemons"?

Accepted Answer

A)  Sellers of citrus fruit-lemons, oranges, grapefruit-know the difference between bad fruit and good fruit; buyers do not have this information. 
B)  Because there is little advertising in the market for lemons, buyers have difficulty determining the quality of lemons before they are purchased. 
C)  Potential buyers of used cars have difficulty separating good used cars from bad used cars; bad used cars are often referred to as "lemons." 
D)  Most sellers of used cars have less information about their cars than the dealers who buy them; used cars are often referred to as "lemons." 
A)  Sellers of citrus fruit-lemons, oranges, grapefruit-know the difference between bad fruit and good fruit; buyers do not have this information. 
B)  Because there is little advertising in the market for lemons, buyers have difficulty determining the quality of lemons before they are purchased. 
C)  Potential buyers of used cars have difficulty separating good used cars from bad used cars; bad used cars are often referred to as "lemons." 
D)  Most sellers of used cars have less information about their cars than the dealers who buy them; used cars are often referred to as "lemons."

Question 15

Basic supply and demand analysis indicates that having firms rather than the government provide health insurance to workers

Accepted Answer

A)  changes both the composition of the compensation that firms pay and its level. 
B)  changes the composition of the compensation that firms pay, but does not change its level. 
C)  does not change the composition of the compensation that firms pay, but does change its level. 
D)  changes neither the composition of the compensation that firms pay nor its level. 
A)  changes both the composition of the compensation that firms pay and its level. 
B)  changes the composition of the compensation that firms pay, but does not change its level. 
C)  does not change the composition of the compensation that firms pay, but does change its level. 
D)  changes neither the composition of the compensation that firms pay nor its level.

Question 16

Those who favor changes in the market for health care that would make it more like the markets for other goods and services favor what are generally known as market-based reforms.

Accepted Answer

A) True 
 B)False

Question 17

The difference between adverse selection and moral hazard is that

Accepted Answer

A)  moral hazard happens at the time parties enter into a transaction; adverse selection occurs after the transaction takes place. 
B)  adverse selection happens at the time parties enter into a transaction; moral hazard occurs after the transaction takes place. 
C)  moral hazard is the motive that is behind one party entering into a transaction with another party. Adverse selection refers to the other party being harmed by the transaction. 
D)  moral hazard refers to the likelihood that a transaction will lead one party to be better off at the expense of the other party to the transaction. Adverse selection refers to the consequences of the transaction after it has occurred. 
A)  moral hazard happens at the time parties enter into a transaction; adverse selection occurs after the transaction takes place. 
B)  adverse selection happens at the time parties enter into a transaction; moral hazard occurs after the transaction takes place. 
C)  moral hazard is the motive that is behind one party entering into a transaction with another party. Adverse selection refers to the other party being harmed by the transaction. 
D)  moral hazard refers to the likelihood that a transaction will lead one party to be better off at the expense of the other party to the transaction. Adverse selection refers to the consequences of the transaction after it has occurred.

Question 18

Of the following high-income countries, which has the highest number of CT scanners per 1 million population?

Accepted Answer

A)  Canada 
B)  Japan 
C)  the United Kingdom 
D)  the United States 
A)  Canada 
B)  Japan 
C)  the United Kingdom 
D)  the United States

Question 19

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

Question 20

Consider a used car market in which half the cars are good and half are bad (lemons). Suppose the average price of a good car is $9,000 and the average price of a lemon is $3,000. If rational buyers are willing to pay $6,000 for a used car, then sellers will agree to sell mostly lemons at this price. What is the term used to describe this situation?

Accepted Answer

A)  moral hazard 
B)  adverse selection 
C)  an efficient market 
D)  economic irrationality 
A)  moral hazard 
B)  adverse selection 
C)  an efficient market 
D)  economic irrationality

Exam 7: The Economics of Health Care

Which of the following is not part of the "individual mandate" provision of the Patient Protection and Affordable Care Act (ACA)?

Figure 7-5 Figure 7-5 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 7-5. The efficient price of medical services is

The largest government-run health care system in the world, with 1.4 million employees, is in

In the United States in 2016, the percentage of people who received health insurance through their employer was about

Consider a used car market in which half the cars are good and half are bad (lemons). If buyers are rational, the prices being offered for used cars will result in

As a percentage of GDP, health care spending on Medicare and Medicaid is expected to double over the next 40 years unless health care costs begin to grow at a slower rate.

Vaccinations tend to result in a negative externality.

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?

An increase in the number of medical procedures performed in doctor's offices rather than in hospital settings will tend to shift the ________ curve for medical services to the ________.

How do adverse selection and moral hazard affect the market for insurance?

Changes in the health of the average person are an important indicator of changes in the standard of living.

Why is the study of asymmetric information associated with the market for "lemons"?

Basic supply and demand analysis indicates that having firms rather than the government provide health insurance to workers

Those who favor changes in the market for health care that would make it more like the markets for other goods and services favor what are generally known as market-based reforms.

The difference between adverse selection and moral hazard is that

Of the following high-income countries, which has the highest number of CT scanners per 1 million population?

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

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, Banks, and the Federal Reserve System

Monetary Policy

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Inflation, Unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

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An increase in the number of medical procedures performed in doctor's offices rather than in hospital settings will tend to shift the curve for medical services to the .