Question 1

Consider a used car market in which half the cars are good and half are bad (lemons). A rational buyer in this market should

Accepted Answer

A)  offer to pay a price equal to the most she would pay for a good car. 
B)  offer to pay a price equal to the most she would pay for a lemon. 
C)  offer to pay a price somewhere between the price she would pay for a good car and the price she would pay for a lemon. 
D)  save up and buy a new car. 
A)  offer to pay a price equal to the most she would pay for a good car. 
B)  offer to pay a price equal to the most she would pay for a lemon. 
C)  offer to pay a price somewhere between the price she would pay for a good car and the price she would pay for a lemon. 
D)  save up and buy a new car.

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.
-If an employee receives health insurance through his or her employer, the employer

Accepted Answer

A)  still withholds contributions for Medicare and Medicaid from the employee's paycheck. 
B)  still withholds contributions for Medicare, but not Medicaid, from the employee's paycheck. 
C)  still withholds contributions for Medicaid, but not Medicare, from the employee's paycheck. 
D)  is no longer required to withhold contributions for Medicare or Medicaid from the employee's paycheck. 
A)  still withholds contributions for Medicare and Medicaid from the employee's paycheck. 
B)  still withholds contributions for Medicare, but not Medicaid, from the employee's paycheck. 
C)  still withholds contributions for Medicaid, but not Medicare, from the employee's paycheck. 
D)  is no longer required to withhold contributions for Medicare or Medicaid from the employee's paycheck.

Question 3

In the United States in 2012, of the firms that employed more than 200 workers that offer health insurance to workers, about ________ of employees did not accept the coverage.

Accepted Answer

A)  2%. 
B)  38%. 
C)  62%. 
D)  98%. 
A)  2%. 
B)  38%. 
C)  62%. 
D)  98%.

Question 4

The health care system in Canada is referred to as ________, and is a system in which the government provides national health insurance to all Canadian residents.

Accepted Answer

A)  an out-of-pocket system 
B)  a single-payer health care system 
C)  a universal health insurance system 
D)  socialized medicine 
A)  an out-of-pocket system 
B)  a single-payer health care system 
C)  a universal health insurance system 
D)  socialized medicine

Question 5

Under the Patient Protection and Affordable Care Act (ACA), insurance companies will be required to participate in a high-risk pool that will cover individuals with pre-existing medical conditions.

Accepted Answer

A) True 
 B)False

Question 6

If consumers paid the full price of medical services instead of using health insurance and third-party payers to cover part of the cost, the quantity of medical services provided would increase.

Accepted Answer

A) True 
 B)False

Question 7

By the year 2013, health care spending on Medicare, Medicaid, and other U.S. government programs as a percentage of GDP had reached a level of

Accepted Answer

A)  2.2 percent. 
B)  6 percent. 
C)  17.5 percent. 
D)  21.5 percent. 
A)  2.2 percent. 
B)  6 percent. 
C)  17.5 percent. 
D)  21.5 percent.

Question 8

A goal of ________ is to give patients an incentive to pay more attention to the prices of medical services. This would tend to increase economic efficiency by decreasing the costs of medical services

Accepted Answer

A)  the Patient Protection and Affordable Care Act (AC
A)  
B)  market-based reforms of the health care system 
C)  government-provided health care 
D)  socialized medicine 
A)  the Patient Protection and Affordable Care Act (AC
A)  
B)  market-based reforms of the health care system 
C)  government-provided health care 
D)  socialized medicine

Question 9

Most employees ________ on the value of health insurance provided by employers, and most people ________ when buying individual health insurance policies.

Accepted Answer

A)  pay taxes; get a tax break 
B)  pay taxes; do not get a tax break 
C)  do not pay taxes; get a tax break 
D)  do not pay taxes ; do not get a tax break 
A)  pay taxes; get a tax break 
B)  pay taxes; do not get a tax break 
C)  do not pay taxes; get a tax break 
D)  do not pay taxes ; do not get a tax break

Question 10

The Congressional Budget Office estimates that ________ of the increase in federal spending on Medicare and Medicaid over the next 75 years will be due to increases in the cost of providing health care.

Accepted Answer

A)  very little 
B)  less than half 
C)  most 
D)  all 
A)  very little 
B)  less than half 
C)  most 
D)  all

Question 11

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. With insurance and a third-party payer system, what price do doctors receive for medical services?

Accepted Answer

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

Question 12

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.
-In the United States, the bulk of health care spending is paid by health insurance companies. Such a system is also called a third-party payer system where consumers of health care pay a nominal fee and the rest are paid by the health insurance provider. Why might such a system lead to an inefficient outcome?

Accepted Answer

A)  Health insurance companies have an incentive to control cost and therefore tend to deny consumers many cutting edge medical treatments. 
B)  Consumers have an incentive to over-consume health care services because they pay prices well below the cost of providing these services. 
C)  Physicians concerned that insurance companies may not approve payments tend not to order expensive tests for their patients. 
D)  Consumers fearing that excessive use of health care services may lead to a rise in insurance premiums tend to under-consume health care services. 
A)  Health insurance companies have an incentive to control cost and therefore tend to deny consumers many cutting edge medical treatments. 
B)  Consumers have an incentive to over-consume health care services because they pay prices well below the cost of providing these services. 
C)  Physicians concerned that insurance companies may not approve payments tend not to order expensive tests for their patients. 
D)  Consumers fearing that excessive use of health care services may lead to a rise in insurance premiums tend to under-consume health care services.

Question 13

The Congressional Budget Office estimates that most of the increase in federal spending on Medicare and Medicaid will be due to

Accepted Answer

A)  the aging population. 
B)  increases in the cost of providing health care. 
C)  increases in immigration. 
D)  declining income levels. 
A)  the aging population. 
B)  increases in the cost of providing health care. 
C)  increases in immigration. 
D)  declining income levels.

Question 14

Figure 7-6   Figure 7-6 represents the supply and demand for medical services with and without a third-party payer.
-Refer to Figure 7-6. Answer the following questions:
1. What would be the equilibrium price and quantity if consumers had to pay the full price of medical services?
2. With insurance acting as a third-party payer, what price will consumers pay for medical service?
3. With insurance acting as a third-party payer, what price will doctors receive for medical service?
4. With insurance acting as a third-party payer, what will be the equilibrium quantity of medical services?
5. With insurance acting as a third-party payer, what will be the value of the deadweight loss?

Accepted Answer

1. $50; 40

Question 15

In 2013, health care made 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 16

In the 1973 movie Save the Tiger, Jack Lemmon plays Harry Stoner, the CEO of a clothing manufacturer whose business has fallen on hard times. At one point in the movie, Stoner convinces his partner to hire someone to burn one of their buildings to collect on their insurance policy. What term refers to the information problem that led the insurance company to sell a policy for this building to Stoner and his partner?

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 17

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 18

Changes in the health of the average person are relatively unimportant as an indicator of changes in the standard of living.

Accepted Answer

A) True 
 B)False

Question 19

A contract under which a buyer agrees to make payments in exchange for the provider agreeing to pay some or all of the buyer's medical bills is referred to as

Accepted Answer

A)  a fee-for-service plan. 
B)  the Affordable Care Act. 
C)  a deductible. 
D)  health insurance. 
A)  a fee-for-service plan. 
B)  the Affordable Care Act. 
C)  a deductible. 
D)  health insurance.

Question 20

Because consumers who have insurance provided by their employers usually only pay a deductible for a visit to the doctor's office,

Accepted Answer

A)  employers have more incentive to allow employees time off for doctor visits. 
B)  doctors have less incentive to control their costs. 
C)  insurance companies have more incentive to approve medical procedures for their policy holders. 
D)  consumers have less incentive to visit the doctor's office on a more frequent basis. 
A)  employers have more incentive to allow employees time off for doctor visits. 
B)  doctors have less incentive to control their costs. 
C)  insurance companies have more incentive to approve medical procedures for their policy holders. 
D)  consumers have less incentive to visit the doctor's office on a more frequent basis.

Exam 7: The Economics of Health Care

Consider a used car market in which half the cars are good and half are bad (lemons). A rational buyer in this market should

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. -If an employee receives health insurance through his or her employer, the employer

In the United States in 2012, of the firms that employed more than 200 workers that offer health insurance to workers, about ________ of employees did not accept the coverage.

The health care system in Canada is referred to as ________, and is a system in which the government provides national health insurance to all Canadian residents.

Under the Patient Protection and Affordable Care Act (ACA), insurance companies will be required to participate in a high-risk pool that will cover individuals with pre-existing medical conditions.

If consumers paid the full price of medical services instead of using health insurance and third-party payers to cover part of the cost, the quantity of medical services provided would increase.

By the year 2013, health care spending on Medicare, Medicaid, and other U.S. government programs as a percentage of GDP had reached a level of

A goal of ________ is to give patients an incentive to pay more attention to the prices of medical services. This would tend to increase economic efficiency by decreasing the costs of medical services

Most employees ________ on the value of health insurance provided by employers, and most people ________ when buying individual health insurance policies.

The Congressional Budget Office estimates that ________ of the increase in federal spending on Medicare and Medicaid over the next 75 years will be due to increases in the cost of providing health care.

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. With insurance and a third-party payer system, what price do doctors receive for medical services?

The Congressional Budget Office estimates that most of the increase in federal spending on Medicare and Medicaid will be due to

In 2013, health care made up ________ of the U.S. economy

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

Changes in the health of the average person are relatively unimportant as an indicator of changes in the standard of living.

A contract under which a buyer agrees to make payments in exchange for the provider agreeing to pay some or all of the buyer's medical bills is referred to as

Because consumers who have insurance provided by their employers usually only pay a deductible for a visit to the doctor's office,

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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Most employees on the value of health insurance provided by employers, and most people when buying individual health insurance policies.