Question 1

During the last four decades, the share of health-care expenditures paid for by third parties (either the government or insurance companies)

Accepted Answer

A) has remained relatively constant. 
B) fell from approximately 60 percent in 1960 to 30 percent in 2007. 
C) increased from approximately 45 percent in 1960 to over 85 percent in 2007. 
D) declined during the 15 years following the passage of Medicare but has been increasing since 1980. 
A) has remained relatively constant. 
B) fell from approximately 60 percent in 1960 to 30 percent in 2007. 
C) increased from approximately 45 percent in 1960 to over 85 percent in 2007. 
D) declined during the 15 years following the passage of Medicare but has been increasing since 1980.

Question 2

Which of the following would help to avert a healthcare crisis?

Accepted Answer

A) requiring employers to pick up 100 percent of the healthcare costs for their employees 
B) discouraging medical savings accounts since these provide additional funds for medical care, and therefore, they are likely to drive up medical prices 
C) discouraging the purchase of health insurance plans with small co-payments 
D) structural changes that would increase the competitiveness of the health insurance and medical services markets 
A) requiring employers to pick up 100 percent of the healthcare costs for their employees 
B) discouraging medical savings accounts since these provide additional funds for medical care, and therefore, they are likely to drive up medical prices 
C) discouraging the purchase of health insurance plans with small co-payments 
D) structural changes that would increase the competitiveness of the health insurance and medical services markets

Question 3

During the 1965-2009 period, the price index of healthcare services

Accepted Answer

A) declined slightly relative to the overall consumer price index. 
B) fell by approximately 50 percent compared to the overall consumer price index. 
C) increased at twice the rate of the overall consumer price index. 
D) rose during a brief period following the passage of Medicare and Medicaid but has been relatively stable since that time. 
A) declined slightly relative to the overall consumer price index. 
B) fell by approximately 50 percent compared to the overall consumer price index. 
C) increased at twice the rate of the overall consumer price index. 
D) rose during a brief period following the passage of Medicare and Medicaid but has been relatively stable since that time.

Question 4

Economic theory suggests that controlling health-care costs through rules and regulations imposed by the government or another third party is generally

Accepted Answer

A) more effective than using competition and the choices of consumers spending their own money to control costs. 
B) less effective than using competition and the choices of consumers spending their own money to control costs. 
C) only workable if the entire health-care sector is socialized (operated by the government). 
D) possible to implement successfully because these rules and regulations tend to be in harmony with the interests of both consumers and health-care providers. 
A) more effective than using competition and the choices of consumers spending their own money to control costs. 
B) less effective than using competition and the choices of consumers spending their own money to control costs. 
C) only workable if the entire health-care sector is socialized (operated by the government). 
D) possible to implement successfully because these rules and regulations tend to be in harmony with the interests of both consumers and health-care providers.

Question 5

Which of the following is true?

Accepted Answer

A) The growth of third-party payments during the last several decades has helped control inflation in the health-care sector. 
B) Public policy encourages Americans to purchase low deductible/low co-payment health insurance coverage through their employers. 
C) Low deductible health insurance coverage encourages health-care consumers to search for the best prices. 
D) The 2.9 percent Medicare payroll tax is sufficient to cover the cost of the promised future health-care services to senior citizens. 
A) The growth of third-party payments during the last several decades has helped control inflation in the health-care sector. 
B) Public policy encourages Americans to purchase low deductible/low co-payment health insurance coverage through their employers. 
C) Low deductible health insurance coverage encourages health-care consumers to search for the best prices. 
D) The 2.9 percent Medicare payroll tax is sufficient to cover the cost of the promised future health-care services to senior citizens.

Question 6

Which of the following is true?

Accepted Answer

A) More than half of medical bills are paid for directly by consumers. 
B) Healthcare insurance provided by one's employer is counted as personal income. 
C) State mandated coverage of medical procedures like in-vitro fertilization, drug rehabilitation, and acupuncture, make health insurance more affordable. 
D) Regulations prevent consumers from purchasing a health insurance plan offered in another state. 
A) More than half of medical bills are paid for directly by consumers. 
B) Healthcare insurance provided by one's employer is counted as personal income. 
C) State mandated coverage of medical procedures like in-vitro fertilization, drug rehabilitation, and acupuncture, make health insurance more affordable. 
D) Regulations prevent consumers from purchasing a health insurance plan offered in another state.

Question 7

When a third party pays a larger and larger share of the purchasing price of a good, economic theory indicates that the

Accepted Answer

A) demand for the good will decline. 
B) consumers of the good will have less and less incentive to economize on its use. 
C) suppliers of the good will have a stronger incentive to provide the good at low prices. 
D) prices of the good will tend to decline with the passage of time. 
A) demand for the good will decline. 
B) consumers of the good will have less and less incentive to economize on its use. 
C) suppliers of the good will have a stronger incentive to provide the good at low prices. 
D) prices of the good will tend to decline with the passage of time.

Question 8

Have market forces failed in keeping healthcare costs under control?

Accepted Answer

A) Yes; in most high-income countries healthcare is a socialized industry and costs have been kept low. 
B) Yes; the government has allowed market forces to determine costs, yet healthcare spending continues to rise rapidly. 
C) No; government regulations have undermined the operation of markets and created perverse incentives that have led to rising prices and soaring healthcare expenditures. 
D) No; market forces have been allowed to determine costs and those costs have remained low relative to the consumer price index. 
A) Yes; in most high-income countries healthcare is a socialized industry and costs have been kept low. 
B) Yes; the government has allowed market forces to determine costs, yet healthcare spending continues to rise rapidly. 
C) No; government regulations have undermined the operation of markets and created perverse incentives that have led to rising prices and soaring healthcare expenditures. 
D) No; market forces have been allowed to determine costs and those costs have remained low relative to the consumer price index.

Question 9

The growth of third-party payments has resulted in higher prices for health-care services because

Accepted Answer

A) the lower out-of-pocket cost for consumers has increased the demand for health-care services. 
B) consumers have less of an incentive to economize and shop for low-cost services when they pay a lower share of their bill. 
C) producers have less of an incentive to provide health-care services at a low price when consumers are not as cost conscious. 
D) All of the above are true. 
A) the lower out-of-pocket cost for consumers has increased the demand for health-care services. 
B) consumers have less of an incentive to economize and shop for low-cost services when they pay a lower share of their bill. 
C) producers have less of an incentive to provide health-care services at a low price when consumers are not as cost conscious. 
D) All of the above are true.

Question 10

During the last three decades, the real (adjusted for inflation) expenditures

Accepted Answer

A) on Medicare have grown rapidly, but the real expenditures on Medicaid have been virtually constant. 
B) on the Medicare program have been virtually constant but the real expenditures on Medicaid have increased substantially. 
C) on both Medicare and Medicaid have increased substantially. 
D) on both Medicare and Medicaid have been virtually constant. 
A) on Medicare have grown rapidly, but the real expenditures on Medicaid have been virtually constant. 
B) on the Medicare program have been virtually constant but the real expenditures on Medicaid have increased substantially. 
C) on both Medicare and Medicaid have increased substantially. 
D) on both Medicare and Medicaid have been virtually constant.

Question 11

Growth in the share of health-care expenditures covered by third parties (for example, insurance or government programs) will

Accepted Answer

A) place downward pressure on the prices of health-care services. 
B) reduce the incentive of suppliers to provide consumers with health-care services at a low cost. 
C) make consumers more sensitive to the price of health-care services. 
D) make it easier to control the growth of health-care expenditures. 
A) place downward pressure on the prices of health-care services. 
B) reduce the incentive of suppliers to provide consumers with health-care services at a low cost. 
C) make consumers more sensitive to the price of health-care services. 
D) make it easier to control the growth of health-care expenditures.

Question 12

If a third party pays for an individual to consume a good, how is the decision making of consumers affected? How does this affect the actions of suppliers?

Accepted Answer

When spending their own money, consumers

Question 13

From the standpoint of economic efficiency, which of the following is a major advantage of medical savings accounts?

Accepted Answer

A) They encourage healthcare consumers to purchase low-deductible, low co-payment medical insurance plans. 
B) They guarantee that no American will ever have to pay another medical bill. 
C) They encourage healthcare consumers to economize. 
D) They will force employers to pay a larger share of the medical expenses of their employees. 
A) They encourage healthcare consumers to purchase low-deductible, low co-payment medical insurance plans. 
B) They guarantee that no American will ever have to pay another medical bill. 
C) They encourage healthcare consumers to economize. 
D) They will force employers to pay a larger share of the medical expenses of their employees.

Question 14

Economic theory indicates that the growth of subsidies to healthcare consumers and accompanying expansion in third-party payments will

Accepted Answer

A) lead to higher healthcare prices. 
B) lead to lower healthcare prices. 
C) reduce the incentive of consumers to economize. 
D) increase the incentive of healthcare providers to provide their services at a low cost. 
E) do both a and c above. 
A) lead to higher healthcare prices. 
B) lead to lower healthcare prices. 
C) reduce the incentive of consumers to economize. 
D) increase the incentive of healthcare providers to provide their services at a low cost. 
E) do both a and c above.

Question 15

If the supply of health-care services is highly inelastic and larger government subsidies lead to an increase in the demand for the services,

Accepted Answer

A) the prices of health-care services will rise by only a small amount, but the quantity supplied will increase substantially. 
B) the prices of health-care services will rise substantially, but the quantity supplied will increase by only a small amount. 
C) both health-care prices and the quantity of the services supplied will increase substantially. 
D) the prices of health-care services will decline, but there will be only a small change in the quantity supplied. 
A) the prices of health-care services will rise by only a small amount, but the quantity supplied will increase substantially. 
B) the prices of health-care services will rise substantially, but the quantity supplied will increase by only a small amount. 
C) both health-care prices and the quantity of the services supplied will increase substantially. 
D) the prices of health-care services will decline, but there will be only a small change in the quantity supplied.

Question 16

Under the current structure of Medicare, economic theory indicates that the movement of the baby boom generation into the retirement phase of life during the years following 2011 will

Accepted Answer

A) reduce the share of healthcare services paid for by a third party. 
B) push both healthcare prices and expenditures upward. 
C) increase the incentive of suppliers to provide healthcare services at a low cost. 
D) increase the incentive of consumers to economize on their use of healthcare. 
A) reduce the share of healthcare services paid for by a third party. 
B) push both healthcare prices and expenditures upward. 
C) increase the incentive of suppliers to provide healthcare services at a low cost. 
D) increase the incentive of consumers to economize on their use of healthcare.

Question 17

During the last four decades,

Accepted Answer

A) the total expenditures of Americans on health care have been relatively constant. 
B) the share of health-care expenditures covered by a third party (either the government or an insurance company) has increased substantially. 
C) the prices of health-care services have risen but not as rapidly as the general level of prices. 
D) health-care providers have lowered prices in response to the rapid increase in medical technology. 
A) the total expenditures of Americans on health care have been relatively constant. 
B) the share of health-care expenditures covered by a third party (either the government or an insurance company) has increased substantially. 
C) the prices of health-care services have risen but not as rapidly as the general level of prices. 
D) health-care providers have lowered prices in response to the rapid increase in medical technology.

Question 18

Economic theory indicates that as a larger share of medical services are paid for by a third party (for example, insurance companies or the government) rather than directly by the consumer,

Accepted Answer

A) consumers will have a stronger incentive to economize. 
B) consumers will have a weaker incentive to economize and the prices of medical services will rise more rapidly than would otherwise be the case. 
C) consumers will have a weaker incentive to economize, but medical service suppliers will have a stronger incentive to keep prices low. 
D) the suppliers of medical services will have more incentive to economize. 
A) consumers will have a stronger incentive to economize. 
B) consumers will have a weaker incentive to economize and the prices of medical services will rise more rapidly than would otherwise be the case. 
C) consumers will have a weaker incentive to economize, but medical service suppliers will have a stronger incentive to keep prices low. 
D) the suppliers of medical services will have more incentive to economize.

Question 19

When the 2010 Patient Protection and Affordable Care Act is fully implemented, it will

Accepted Answer

A) set the prices (reimbursement rates) for more than 7,000 different medical procedures. 
B) increase the supply of doctors and other medical services. 
C) increase the supply of doctors and other medical services 
D) reduce the share of health care expenses paid for by a third party, which will increase the incentive of both consumers and medical providers to economize. 
E) All of the above are true. 
A) set the prices (reimbursement rates) for more than 7,000 different medical procedures. 
B) increase the supply of doctors and other medical services. 
C) increase the supply of doctors and other medical services 
D) reduce the share of health care expenses paid for by a third party, which will increase the incentive of both consumers and medical providers to economize. 
E) All of the above are true.

Question 20

Which of the following grew rapidly during the years following the passage of the Medicare and Medicaid programs?

Accepted Answer

A) the share of healthcare expenditures financed by third parties 
B) the prices of healthcare relative to the prices of other goods and services 
C) expenditures on healthcare as a share of the economy 
D) all of the above 
A) the share of healthcare expenditures financed by third parties 
B) the prices of healthcare relative to the prices of other goods and services 
C) expenditures on healthcare as a share of the economy 
D) all of the above

Exam 22: Appendix: the Economics of Healthcare

During the last four decades, the share of health-care expenditures paid for by third parties (either the government or insurance companies)

Which of the following would help to avert a healthcare crisis?

During the 1965-2009 period, the price index of healthcare services

Economic theory suggests that controlling health-care costs through rules and regulations imposed by the government or another third party is generally

Which of the following is true?

Which of the following is true?

When a third party pays a larger and larger share of the purchasing price of a good, economic theory indicates that the

Have market forces failed in keeping healthcare costs under control?

The growth of third-party payments has resulted in higher prices for health-care services because

During the last three decades, the real (adjusted for inflation) expenditures

Growth in the share of health-care expenditures covered by third parties (for example, insurance or government programs) will

If a third party pays for an individual to consume a good, how is the decision making of consumers affected? How does this affect the actions of suppliers?

From the standpoint of economic efficiency, which of the following is a major advantage of medical savings accounts?

Economic theory indicates that the growth of subsidies to healthcare consumers and accompanying expansion in third-party payments will

If the supply of health-care services is highly inelastic and larger government subsidies lead to an increase in the demand for the services,

Under the current structure of Medicare, economic theory indicates that the movement of the baby boom generation into the retirement phase of life during the years following 2011 will

During the last four decades,

Economic theory indicates that as a larger share of medical services are paid for by a third party (for example, insurance companies or the government) rather than directly by the consumer,

When the 2010 Patient Protection and Affordable Care Act is fully implemented, it will

Which of the following grew rapidly during the years following the passage of the Medicare and Medicaid programs?

The Economic Approach

A: Some Tools of the Economist

B: Some Tools of the Economist

A: Supply, Demand, and the Market Process

B: Supply, Demand, and the Market Process

A: Supply and Demand: Applications and Extensions

B: Supply and Demand: Applications and Extensions

Difficult Cases for the Market and the Role of Government

The Economics of Collective Decision-Making

Consumer Choice and Elasticity

A: Costs and the Supply of Goods

B: Costs and the Supply of Goods

A: Price Takers and the Competitive Process

B: Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

A: Price-Searcher Markets With High Entry Barriers

B: Price-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, Productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Appendix: Government Spending and Taxation

Appendix: the Economics of Social Security

Appendix: the Stock Market: Its Function, Performance, and Potential As an Investment Opportunity

Appendix: Great Debates in Economics: Keynes Versus Hayek

Appendix: the Crisis of 2008: Causes and Lessons for the Future

Appendix: Lessons From the Great Depression

Appendix:education: Problems and Performance

Appendix: Earnings Differences Between Men and Women

Appendix: the Question of Resource Exhaustion

Appendix: Do Labor Unions Increase the Wages of Workers

Appendix: Difficult Environmental Cases and the Role of Government

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