Question 1

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 2

Health care makes up ________ of the U.S.economy.

Accepted Answer

A) about 2 percent 
B) roughly 8 percent 
C) more than one-sixth 
D) almost two-thirds 
A) about 2 percent 
B) roughly 8 percent 
C) more than one-sixth 
D) almost two-thirds

Question 3

Most employees ________ pay taxes on the value of health insurance provided by employers, and most people ________ get a tax break when buying individual health insurance policies.

Accepted Answer

A) do; do 
B) do; do not 
C) do not; do 
D) do not; do not 
A) do; do 
B) do; do not 
C) do not; do 
D) do not; do not

Question 4

One effect of adverse selection in a market is that the equilibrium quantity of the product may
be smaller than it would have been if there were no asymmetric information problems.

Accepted Answer

A) True 
 B)False

Question 5

In the United States, out-of-pocket spending on health care as a percentage of all spending on health care has ________ since 1960.

Accepted Answer

A) slowly risen 
B) steadily declined 
C) more than doubled 
D) remained stable 
A) slowly risen 
B) steadily declined 
C) more than doubled 
D) remained stable

Question 6

The overall mortality rate in the United States has remained fairly constant for the past 30 years.

Accepted Answer

A) True 
 B)False

Question 7

In the principal-agent relationship, the agent is

Accepted Answer

A) the owner of a resource that has hired another party to act on his behalf. 
B) the person who is placed in control over resources that are not his own, with a contractual obligation to use these resources in the interests of some other party. 
C) the person who is placed in control over resources that are not his own and agrees to compensate the resource owner in the event of outcomes that do not satisfy the resource owner. 
D) the person who places his resources in professional hands in exchange for the professional's promise to act on the resource owner's behalf. 
A) the owner of a resource that has hired another party to act on his behalf. 
B) the person who is placed in control over resources that are not his own, with a contractual obligation to use these resources in the interests of some other party. 
C) the person who is placed in control over resources that are not his own and agrees to compensate the resource owner in the event of outcomes that do not satisfy the resource owner. 
D) the person who places his resources in professional hands in exchange for the professional's promise to act on the resource owner's behalf.

Question 8

In 2014, employees covered by company-provided health insurance paid ________ percent of the cost of their own health insurance.

Accepted Answer

A) 3 
B) 18 
C) 37 
D) 65 
A) 3 
B) 18 
C) 37 
D) 65

Question 9

What are the main sources of health insurance in the United States?

Accepted Answer

The percentage of Americans covered by v

Question 10

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 11

If a doctor knows that an insurance company will pay for most of a patient's bill, the doctor has more of an incentive to require additional medical procedures and tests, even if the patient may not require them.This is an example of

Accepted Answer

A) moral hazard. 
B) the principle-agent problem. 
C) asymmetric information. 
D) adverse selection. 
A) moral hazard. 
B) the principle-agent problem. 
C) asymmetric information. 
D) adverse selection.

Question 12

If a buyer in an economic transaction has more information than the seller, the buyer benefits at the expense of the seller.This phenomenon is due to

Accepted Answer

A) moral hazard. 
B) adverse selection. 
C) economically irrational behavior. 
D) gains from trade. 
A) moral hazard. 
B) adverse selection. 
C) economically irrational behavior. 
D) gains from trade.

Question 13

Which of the following reforms could potentially reduce spending on health care without reducing the effectiveness of health care received?

Accepted Answer

A) nationalize health care so that all health services are government funded and operated 
B) give every citizen a fixed amount of money that can only be spent on health care services 
C) reimburse consumers for preventive health care expenditures so as to avoid costly emergency medical treatments in the future 
D) standardize the tax treatment of employer-based health insurance benefits and private spending on health care 
A) nationalize health care so that all health services are government funded and operated 
B) give every citizen a fixed amount of money that can only be spent on health care services 
C) reimburse consumers for preventive health care expenditures so as to avoid costly emergency medical treatments in the future 
D) standardize the tax treatment of employer-based health insurance benefits and private spending on health care

Question 14

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 doctors receive for medical services?

Accepted Answer

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

Question 15

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, the equilibrium quantity of medical services is

Accepted Answer

A) 200. 
B) 500. 
C) 700. 
D) >700. 
A) 200. 
B) 500. 
C) 700. 
D) >700.

Question 16

Which of the following is not an advantage to an insurance company of insuring a large group of people for health insurance?

Accepted Answer

A) The characteristics of a large group are likely to reflect those of the entire population. 
B) It is easier to accurately predict the number of claims for a group than for an individual. 
C) When all group members pay the premium, the problem of moral hazard is reduced. 
D) When all group members pay the premium, the problem of adverse selection is reduced. 
A) The characteristics of a large group are likely to reflect those of the entire population. 
B) It is easier to accurately predict the number of claims for a group than for an individual. 
C) When all group members pay the premium, the problem of moral hazard is reduced. 
D) When all group members pay the premium, the problem of adverse selection is reduced.

Question 17

A key difficulty facing insurance companies is that people know more about their health than do insurance companies, and that those people who are seriously ill are the most likely to want to obtain health insurance.What is this phenomenon called?

Accepted Answer

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

Question 18

Economists John Cogan, Glenn Hubbard, and Daniel Kessler have estimated that repealing the tax preference for employer-provided health insurance would

Accepted Answer

A) significantly reduce the effectiveness of the health care received by those enrolled in these programs. 
B) increase overall spending on health care as consumers would have to pay a higher price for medical services. 
C) drive up prices for health care coverage since insurance reimbursements to doctors would be reduced. 
D) reduce spending by people enrolled in these programs by 33 percent. 
A) significantly reduce the effectiveness of the health care received by those enrolled in these programs. 
B) increase overall spending on health care as consumers would have to pay a higher price for medical services. 
C) drive up prices for health care coverage since insurance reimbursements to doctors would be reduced. 
D) reduce spending by people enrolled in these programs by 33 percent.

Question 19

Most doctors and hospitals operate as private businesses in all of the following countries except

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 20

Of the following, which has most likely contributed the most to the rapid rise in health care costs in the United States?

Accepted Answer

A) the cost of malpractice insurance 
B) the cost to treat uninsured patients 
C) slow growth in labor productivity in health care 
D) the cost of malpractice lawsuit settlements 
A) the cost of malpractice insurance 
B) the cost to treat uninsured patients 
C) slow growth in labor productivity in health care 
D) the cost of malpractice lawsuit settlements

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

Health care makes up ________ of the U.S.economy.

Most employees pay taxes on the value of health insurance provided by employers, and most people get a tax break when buying individual health insurance policies.

One effect of adverse selection in a market is that the equilibrium quantity of the product may be smaller than it would have been if there were no asymmetric information problems.

In the United States, out-of-pocket spending on health care as a percentage of all spending on health care has ________ since 1960.

The overall mortality rate in the United States has remained fairly constant for the past 30 years.

In the principal-agent relationship, the agent is

In 2014, employees covered by company-provided health insurance paid ________ percent of the cost of their own health insurance.

What are the main sources of health insurance in the United States?

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

If a doctor knows that an insurance company will pay for most of a patient's bill, the doctor has more of an incentive to require additional medical procedures and tests, even if the patient may not require them.This is an example of

If a buyer in an economic transaction has more information than the seller, the buyer benefits at the expense of the seller.This phenomenon is due to

Which of the following reforms could potentially reduce spending on health care without reducing the effectiveness of health care received?

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 doctors receive for medical services?

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, the equilibrium quantity of medical services is

Which of the following is not an advantage to an insurance company of insuring a large group of people for health insurance?

A key difficulty facing insurance companies is that people know more about their health than do insurance companies, and that those people who are seriously ill are the most likely to want to obtain health insurance.What is this phenomenon called?

Economists John Cogan, Glenn Hubbard, and Daniel Kessler have estimated that repealing the tax preference for employer-provided health insurance would

Most doctors and hospitals operate as private businesses in all of the following countries except

Of the following, which has most likely contributed the most to the rapid rise in health care costs in the United States?

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

Filters

Exam 7: The Economics of 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.

Health care makes up ________ of the U.S.economy.

Most employees ________ pay taxes on the value of health insurance provided by employers, and most people ________ get a tax break when buying individual health insurance policies.

One effect of adverse selection in a market is that the equilibrium quantity of the product may be smaller than it would have been if there were no asymmetric information problems.

In the United States, out-of-pocket spending on health care as a percentage of all spending on health care has ________ since 1960.

The overall mortality rate in the United States has remained fairly constant for the past 30 years.

In the principal-agent relationship, the agent is

In 2014, employees covered by company-provided health insurance paid ________ percent of the cost of their own health insurance.

What are the main sources of health insurance in the United States?

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

If a doctor knows that an insurance company will pay for most of a patient's bill, the doctor has more of an incentive to require additional medical procedures and tests, even if the patient may not require them.This is an example of

If a buyer in an economic transaction has more information than the seller, the buyer benefits at the expense of the seller.This phenomenon is due to

Which of the following reforms could potentially reduce spending on health care without reducing the effectiveness of health care received?

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 doctors receive for medical services?

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, the equilibrium quantity of medical services is

Which of the following is not an advantage to an insurance company of insuring a large group of people for health insurance?

A key difficulty facing insurance companies is that people know more about their health than do insurance companies, and that those people who are seriously ill are the most likely to want to obtain health insurance.What is this phenomenon called?

Economists John Cogan, Glenn Hubbard, and Daniel Kessler have estimated that repealing the tax preference for employer-provided health insurance would

Most doctors and hospitals operate as private businesses in all of the following countries except

Of the following, which has most likely contributed the most to the rapid rise in health care costs in the United States?

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

Filters

Most employees pay taxes on the value of health insurance provided by employers, and most people get a tax break when buying individual health insurance policies.