Exam 7: The Economics of Health Care

Suppose a large firm allows its employees to choose whether to participate in its health insurance plan. The firm is trying to decide between two plans: Plan I has a low monthly premium but a high deductible, and Plan II has a high monthly premium but a low deductible. Under which plan is adverse selection likely to be a bigger problem?

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 is the amount of the deadweight loss?

In the United States, health care spending per person based on income per person is ________ the average for most other countries.

The term that is used to refer to a situation in which one party to an economic transaction has less information than the other party is

In the United States from 1981 to 2011, deaths from ________ increased largely due to the effects of increasing obesity.

What are two reasons why employees would prefer for their employer pay for their health insurance rather than receiving increased wages and paying for their own health insurance?

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

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. If consumers paid the full price of medical services, the equilibrium quantity would be

What is asymmetric information?

Suppose consumers pay less than the true cost of medical services because a third party, such as an insurance company, pays most of the bill. Draw a graph showing the supply and demand for medical services with and without a third-party payer. Identify the market equilibrium without insurance, the market equilibrium with insurance, and the area representing the deadweight loss. Be sure to label the efficient and the market prices and quantities.

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. In one of the key scenes of the movie, Stoner tries to convince his partner that they should hire someone to burn one of their buildings in order to collect on their insurance policy. Harry Stoner's actions are an example of

The Congressional Budget Office estimates that the additional taxes and fees enacted under the ACA will not even cover half of the true cost of the ACA.

What is moral hazard?

The health care system in the United Kingdom is referred to as ________, under which the government owns most of the hospitals and employs most of the doctors.

Under current U.S. tax laws individuals do not pay taxes on health insurance benefits they receive from their employers.

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. At the market equilibrium, the deadweight loss is equal to

In 1960, out-of-pocket spending on health care in the United States was

Canada has a single-payer health care system in which the government provides national health insurance to all Canadian residents.

In the United States, total health care spending per person has been ________, and out-of-pocket spending on health care per person has been ________.

Federal and state governments in the United States pay for ________ of health care spending.