Question 1

What is moral hazard?

Accepted Answer

Moral hazard is a tendency for

Question 2

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

Question 3

Which of the following is not part of the "regulation of health insurance" provision of the Patient Protection and Affordable Care Act (ACA)?

Accepted Answer

A)  Individuals with pre-existing medical conditions will be able to acquire health insurance. 
B)  All policies must provide coverage for dependent children up to age 26. 
C)  Lifetime dollar maximums on coverage will be prohibited. 
D)  Limits on the size of deductibles and on waiting periods before coverage takes effect will be eliminated. 
A)  Individuals with pre-existing medical conditions will be able to acquire health insurance. 
B)  All policies must provide coverage for dependent children up to age 26. 
C)  Lifetime dollar maximums on coverage will be prohibited. 
D)  Limits on the size of deductibles and on waiting periods before coverage takes effect will be eliminated.

Question 4

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 efficient equilibrium price is

Accepted Answer

A)  $30. 
B)  $25. 
C)  $20. 
D)  < $20. 
A)  $30. 
B)  $25. 
C)  $20. 
D)  < $20.

Question 5

Health insurance companies impose deductibles on policies and co-payments on claims

Accepted Answer

A)  to increase sales. 
B)  to reduce moral hazard problems. 
C)  to reduces sunk costs. 
D)  to increase prices. 
A)  to increase sales. 
B)  to reduce moral hazard problems. 
C)  to reduces sunk costs. 
D)  to increase prices.

Question 6

Figure 7-4   Figure 7-4 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 7-4. The efficient quantity of medical services is

Accepted Answer

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

Question 7

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 $9,000 for a good used car but only $3,000 for a lemon. Sellers of good used cars value their cars at $7,500 each and sellers of lemons value their cars at $1,500 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 $6,000. 
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 $6,000.

Question 8

Suppose you see a 2006 Scion xB Sport Wagon advertised in the local newspaper for $8,500. If you knew the car was reliable, you would be willing to pay $10,000 for it. If you knew the car was unreliable, you would only be willing to pay $5,500 for it. Under what circumstances should you buy the car?

Accepted Answer

Because of the lemons problem you should

Question 9

In the United States, the bulk of health care spending is paid by health insurance companies. Such a system is also called a ________, where consumers of health care pay a nominal fee and the rest are paid by the health insurance provider.

Accepted Answer

A)  universal health care system 
B)  third-party payer system 
C)  socialized medicine system 
D)  single-payer system 
A)  universal health care system 
B)  third-party payer system 
C)  socialized medicine system 
D)  single-payer system

Question 10

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 11

Which of the following is an example of adverse selection?

Accepted Answer

A)  The odds of a fire rise after a building is insured because the person with fire insurance is likely to pay less attention to fire hazards. 
B)  Someone who did not install fire alarms and a sprinkler system in a building he owns buys insurance for the building. 
C)  Someone with automobile insurance drives more recklessly than someone without insurance. 
D)  People prefer to buy new cars rather than used cars. 
A)  The odds of a fire rise after a building is insured because the person with fire insurance is likely to pay less attention to fire hazards. 
B)  Someone who did not install fire alarms and a sprinkler system in a building he owns buys insurance for the building. 
C)  Someone with automobile insurance drives more recklessly than someone without insurance. 
D)  People prefer to buy new cars rather than used cars.

Question 12

Compared to other high-income countries, health care spending per person in the United States has been

Accepted Answer

A)  growing at a faster rate. 
B)  declining at a faster rate. 
C)  growing at approximately the same rate. 
D)  declining at approximately the same rate. 
A)  growing at a faster rate. 
B)  declining at a faster rate. 
C)  growing at approximately the same rate. 
D)  declining at approximately the same rate.

Question 13

Figure 7-2   Figure 7-2 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 7-2. 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. 
A)  D1 
B)  D2 
C)  Supply 
D)  All of the above represent marginal social benefit.

Question 14

The number of people receiving Medicare is expected to ________ by the year 2030.

Accepted Answer

A)  reach 5 million by 
B)  stabilize 
C)  decline by 10 percent 
D)  grow to 80 million 
A)  reach 5 million by 
B)  stabilize 
C)  decline by 10 percent 
D)  grow to 80 million

Question 15

In ________, health care spending per person based on income per person is significantly higher than the average for most other countries.

Accepted Answer

A)  Austria 
B)  Canada 
C)  Norway 
D)  the United States 
A)  Austria 
B)  Canada 
C)  Norway 
D)  the United States

Question 16

________ tended to increase spending on health care in the United States.

Accepted Answer

A)  The aging of the U.S. population, rather than advances in medical technology, has 
B)  Advances in medical technology, rather than the aging of the U.S. population, has 
C)  The aging of the U.S. population, as well as advances in medical technology, have 
D)  Neither the aging of the U.S. population, nor advances in medical technology, have 
A)  The aging of the U.S. population, rather than advances in medical technology, has 
B)  Advances in medical technology, rather than the aging of the U.S. population, has 
C)  The aging of the U.S. population, as well as advances in medical technology, have 
D)  Neither the aging of the U.S. population, nor advances in medical technology, have

Question 17

In the United States, doctors and hospitals that provide most health care are

Accepted Answer

A)  primarily private firms. 
B)  primarily employed by the government. 
C)  split evenly between private firms and employed by the government. 
D)  100 percent employed by the government. 
A)  primarily private firms. 
B)  primarily employed by the government. 
C)  split evenly between private firms and employed by the government. 
D)  100 percent employed by the government.

Question 18

Vaccinations tend to result in a negative externality.

Accepted Answer

A) True 
 B)False

Question 19

The provision of the Patient Protection and Affordable Care Act (ACA) which states that every firm with more than 200 full-time employees must offer health insurance to its employees and must automatically enroll them in the plan is the ________ provision.

Accepted Answer

A)  employer mandate 
B)  state health exchanges 
C)  individual mandate 
D)  regulation of health insurance 
A)  employer mandate 
B)  state health exchanges 
C)  individual mandate 
D)  regulation of health insurance

Question 20

One consequence of adverse selection in the market for used cars is that most used cars sold will be lemons.

Accepted Answer

A) True 
 B)False

Exam 7: The Economics of Health Care

What is moral hazard?

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

Which of the following is not part of the "regulation of health insurance" provision of the Patient Protection and Affordable Care Act (ACA)?

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 efficient equilibrium price is

Health insurance companies impose deductibles on policies and co-payments on claims

Figure 7-4 Figure 7-4 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 7-4. The efficient quantity of medical services is

In the United States, the bulk of health care spending is paid by health insurance companies. Such a system is also called a ________, where consumers of health care pay a nominal fee and the rest are paid by the health insurance provider.

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.

Which of the following is an example of adverse selection?

Compared to other high-income countries, health care spending per person in the United States has been

Figure 7-2 Figure 7-2 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 7-2. Marginal social benefit is represented by which curve?

The number of people receiving Medicare is expected to ________ by the year 2030.

In ________, health care spending per person based on income per person is significantly higher than the average for most other countries.

________ tended to increase spending on health care in the United States.

In the United States, doctors and hospitals that provide most health care are

Vaccinations tend to result in a negative externality.

The provision of the Patient Protection and Affordable Care Act (ACA) which states that every firm with more than 200 full-time employees must offer health insurance to its employees and must automatically enroll them in the plan is the ________ provision.

One consequence of adverse selection in the market for used cars is that most used cars sold will be lemons.

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

Fiscal Policy

Inflation, Unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

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