Question 1

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 2

Under the Patient Protection and Affordable Care Act (ACA), residents who do not have health insurance will not be allowed to seek employment.

Accepted Answer

A) True 
 B)False

Question 3

"Cost disease" refers to the tendency for high productivity in the service sector to lead to lower costs in those industries.

Accepted Answer

A) True 
 B)False

Question 4

The largest government-run health care system in the world, with 1.7 million employees, is the National Health Service (NHS) in the United Kingdom. The NHS receives its funding primarily from

Accepted Answer

A)  tariffs. 
B)  the World Health Organization. 
C)  income taxes. 
D)  private businesses. 
A)  tariffs. 
B)  the World Health Organization. 
C)  income taxes. 
D)  private businesses.

Question 5

Which of the following is not an advantage of risk pooling?

Accepted Answer

A)  By insuring large groups as opposed to individuals, health insurance providers reduce adverse selection. 
B)  It gives very sick people in the group the same access to health care and to pay the same premiums as healthy individuals. 
C)  It is easier for an insurance company to estimate the average number of claims likely to be filed under a group policy than it is to predict the number of claims likely to be filed under an individual policy. 
D)  Individuals who are insured and therefore do not have to pay the full cost of health care services may be inclined to overuse those services. 
A)  By insuring large groups as opposed to individuals, health insurance providers reduce adverse selection. 
B)  It gives very sick people in the group the same access to health care and to pay the same premiums as healthy individuals. 
C)  It is easier for an insurance company to estimate the average number of claims likely to be filed under a group policy than it is to predict the number of claims likely to be filed under an individual policy. 
D)  Individuals who are insured and therefore do not have to pay the full cost of health care services may be inclined to overuse those services.

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

The aging of the U.S. population has tended to ________ spending on health care, and the development of new drugs and medical equipment has tended to ________ spending on health care.

Accepted Answer

A)  increase; increase 
B)  increase; decrease 
C)  decrease; increase 
D)  decrease; decrease 
A)  increase; increase 
B)  increase; decrease 
C)  decrease; increase 
D)  decrease; decrease

Question 8

How can improvements in health increase a country's total income?

Accepted Answer

Improvements in health make it possible

Question 9

Of the following high-income countries, which has the highest infant mortality rate?

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 10

The provision of the Patient Protection and Affordable Care Act (ACA) Insurance companies are required to participate in a high-risk pool that will insure individuals with pre-existing medical conditions who have been unable to buy health insurance for at least six months 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 11

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

Accepted Answer

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

Question 12

On average, people in low-income countries ________ than people in high-income countries.

Accepted Answer

A)  have a longer life expectancy 
B)  are subject to a lower infant mortality rate 
C)  are shorter 
D)  are exposed to fewer severe diseases 
A)  have a longer life expectancy 
B)  are subject to a lower infant mortality rate 
C)  are shorter 
D)  are exposed to fewer severe diseases

Question 13

A doctor pursuing the interests of his patients rather than his own interests is an example of the principal-agent problem.

Accepted Answer

A) True 
 B)False

Question 14

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.
-Some economists have argued that certain characteristics of the delivery of health care justify government intervention. One of these characteristics is

Accepted Answer

A)  health care is a public good. 
B)  health care is nonrival and nonexcludable. 
C)  health care generates negative externalities. 
D)  health care generates positive externalities. 
A)  health care is a public good. 
B)  health care is nonrival and nonexcludable. 
C)  health care generates negative externalities. 
D)  health care generates positive externalities.

Question 15

Figure 7-3   Figure 7-3 shows the effect of a positive externality on the market for vaccinations.
-Refer to Figure 7-3. On the above graph, identify the market equilibrium price and quantity, the efficient equilibrium price and quantity, and the value of the deadweight loss resulting from too few people receiving vaccinations.

Accepted Answer

The market equilibrium price a

Question 16

________ account(s) for between 1 and 4 percent of health care costs in the United States.

Accepted Answer

A)  The aging population 
B)  Uninsured patients receiving treatments at hospital emergency rooms that could have been provided less expensively at doctor's offices 
C)  The payments to settle malpractice lawsuits and the premiums doctors pay for malpractice insurance 
D)  Advances in medical technology 
A)  The aging population 
B)  Uninsured patients receiving treatments at hospital emergency rooms that could have been provided less expensively at doctor's offices 
C)  The payments to settle malpractice lawsuits and the premiums doctors pay for malpractice insurance 
D)  Advances in medical technology

Question 17

The Congressional Budget Office estimates that the additional taxes and fees enacted under the ACA will be enough to pay for the plan and reduce the federal government's budget deficit.

Accepted Answer

A) True 
 B)False

Question 18

Typically, the lower the level of income per person in a country, the lower the level of spending per person on health care. This relationship between income and spending indicates that health care is

Accepted Answer

A)  a normal good. 
B)  an inferior good. 
C)  a luxury. 
D)  a necessity. 
A)  a normal good. 
B)  an inferior good. 
C)  a luxury. 
D)  a necessity.

Question 19

Adverse selection refers to the actions people take after they have entered into a transaction that make the other party to the transaction worse off.

Accepted Answer

A) True 
 B)False

Question 20

Some economists and policymakers who are in favor of government-provided health care believe that providing health care will

Accepted Answer

A)  generate additional moral hazard. 
B)  create negative externalities. 
C)  reduce asymmetric information. 
D)  generate more adverse selection. 
A)  generate additional moral hazard. 
B)  create negative externalities. 
C)  reduce asymmetric information. 
D)  generate more adverse selection.

Exam 7: The Economics of Health Care

In the principal-agent relationship, the agent is

Under the Patient Protection and Affordable Care Act (ACA), residents who do not have health insurance will not be allowed to seek employment.

"Cost disease" refers to the tendency for high productivity in the service sector to lead to lower costs in those industries.

The largest government-run health care system in the world, with 1.7 million employees, is the National Health Service (NHS) in the United Kingdom. The NHS receives its funding primarily from

Which of the following is not an advantage of risk pooling?

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

The aging of the U.S. population has tended to ________ spending on health care, and the development of new drugs and medical equipment has tended to ________ spending on health care.

How can improvements in health increase a country's total income?

Of the following high-income countries, which has the highest infant mortality rate?

The provision of the Patient Protection and Affordable Care Act (ACA) Insurance companies are required to participate in a high-risk pool that will insure individuals with pre-existing medical conditions who have been unable to buy health insurance for at least six months is the ________ provision.

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

On average, people in low-income countries ________ than people in high-income countries.

A doctor pursuing the interests of his patients rather than his own interests is an example of the principal-agent problem.

________ account(s) for between 1 and 4 percent of health care costs in the United States.

The Congressional Budget Office estimates that the additional taxes and fees enacted under the ACA will be enough to pay for the plan and reduce the federal government's budget deficit.

Typically, the lower the level of income per person in a country, the lower the level of spending per person on health care. This relationship between income and spending indicates that health care is

Adverse selection refers to the actions people take after they have entered into a transaction that make the other party to the transaction worse off.

Some economists and policymakers who are in favor of government-provided health care believe that providing health care will

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

Filters

The aging of the U.S. population has tended to spending on health care, and the development of new drugs and medical equipment has tended to spending on health care.