Question 1

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 over-use 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 over-use those services. D

Question 2

If a state requires all drivers to purchase auto insurance,insurance companies still face the problem of

Accepted Answer

A)  correctly pricing their insurance. 
B)  sunk costs. 
C)  adverse selection. 
D)  excess demand for their insurance. 
A)  correctly pricing their insurance. 
B)  sunk costs. 
C)  adverse selection. 
D)  excess demand for their insurance. A

Question 3

In markets with asymmetric information,

Accepted Answer

A)  moral hazard causes adverse selection which in turn causes asymmetric information. 
B)  adverse selection causes moral hazard which in turn causes asymmetric information. 
C)  asymmetric information causes moral hazard and then it causes adverse selection. 
D)  asymmetric information causes adverse selection and then it causes moral hazard. 
A)  moral hazard causes adverse selection which in turn causes asymmetric information. 
B)  adverse selection causes moral hazard which in turn causes asymmetric information. 
C)  asymmetric information causes moral hazard and then it causes adverse selection. 
D)  asymmetric information causes adverse selection and then it causes moral hazard. D

Question 4

The overall decline in death rates in the United States since 1981 was due to all of the following except

Accepted Answer

A)  a decline in smoking. 
B)  the decline in the population. 
C)  the availability of new prescription drugs. 
D)  new surgical techniques. 
A)  a decline in smoking. 
B)  the decline in the population. 
C)  the availability of new prescription drugs. 
D)  new surgical techniques.

Question 5

Of the following high-income countries,which has the lowest mortality ratio for cancer?

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 6

Economists John Cogan,R.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 7

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.

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 8

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?

Accepted Answer

A)  Plan I because it is likely to draw participants who expect high medical costs. This group expects to consume much health care services and therefore prefer low deductibles. 
B)  Plan II because it is likely to draw participants who expect high medical costs. Healthy individuals who do not expect to consume much health care services will not be willing to pay the high premiums. 
C)  Plan I because it is likely to draw the relatively healthy employees who do not expect to spend much on health care. Because the monthly premiums are low, the insurance company has to bear a bigger financial burden in the event of serious illnesses. 
D)  Plan II because it is likely to draw employees who tend to over-consume health care services because of the low deductible. Insurance companies are likely to end up paying out more claims than the premiums they collect. 
A)  Plan I because it is likely to draw participants who expect high medical costs. This group expects to consume much health care services and therefore prefer low deductibles. 
B)  Plan II because it is likely to draw participants who expect high medical costs. Healthy individuals who do not expect to consume much health care services will not be willing to pay the high premiums. 
C)  Plan I because it is likely to draw the relatively healthy employees who do not expect to spend much on health care. Because the monthly premiums are low, the insurance company has to bear a bigger financial burden in the event of serious illnesses. 
D)  Plan II because it is likely to draw employees who tend to over-consume health care services because of the low deductible. Insurance companies are likely to end up paying out more claims than the premiums they collect.

Question 9

Some economists believe that by making health care coverage mandatory for all individuals,the demand for medical services will likely ________,which will ________ the costs of 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 10

What is moral hazard?

Accepted Answer

A)  It refers to the private, self-interested actions that people pursue, which when taken collectively leads to a loss in economic surplus. 
B)  It refers to the actions people take after they have entered into a transaction that makes the other party to the transaction worse off. 
C)  It refers to the situation in which one party to a transaction takes advantage of knowing more than the other party to the transaction. 
D)  It refers to the actions people take before they enter into a transaction so as to mislead the other party to the transaction. 
A)  It refers to the private, self-interested actions that people pursue, which when taken collectively leads to a loss in economic surplus. 
B)  It refers to the actions people take after they have entered into a transaction that makes the other party to the transaction worse off. 
C)  It refers to the situation in which one party to a transaction takes advantage of knowing more than the other party to the transaction. 
D)  It refers to the actions people take before they enter into a transaction so as to mislead the other party to the transaction.

Question 11

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 12

The largest government-run health care system in the world,with 1.7 million employees,is in

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 13

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

Accepted Answer

Improvements in health make it possible

Question 14

An analysis of the Patient Protection and Affordable Care Act (PPACA)by Medicare officials claims that additional annual health care spending over the next decade under the PPACA will

Accepted Answer

A)  more than double. 
B)  rise by 10 percent for the first 5 years and then fall by 20 percent for the remaining 5 years. 
C)  continually increase until it reaches an annual rate of 25 percent. 
D)  increase by less than 1 percent. 
A)  more than double. 
B)  rise by 10 percent for the first 5 years and then fall by 20 percent for the remaining 5 years. 
C)  continually increase until it reaches an annual rate of 25 percent. 
D)  increase by less than 1 percent.

Question 15

The health care system in Japan is referred to as ________,under which every resident of Japan is required to enroll in either a private or the government-provided health insurance program.

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 16

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

Accepted Answer

A) True 
 B)False

Question 17

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 18

Some economists have proposed making the tax treatment of employer-provided health insurance the same as the tax treatment of individually purchased health insurance and out-of-pocket health care spending.Such changes would make it more likely that

Accepted Answer

A)  consumers would pay prices closer to the actual costs for routine medical care. 
B)  employers would provide more generous medical coverage to their employees. 
C)  insurance deductibles would decrease. 
D)  the quantity of medical services demanded would increase. 
A)  consumers would pay prices closer to the actual costs for routine medical care. 
B)  employers would provide more generous medical coverage to their employees. 
C)  insurance deductibles would decrease. 
D)  the quantity of medical services demanded would increase.

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

The Pre-Existing Condition Insurance Plan is a federally administered part of the Affordable Care Act,and is designed for people with pre-existing medical conditions to obtain insurance.By offering health insurance to all U.S.citizens with pre-existing medical conditions,the Pre-Existing Condition Insurance Plan eliminates ________ for both the insurer and the insured,and eliminates ________ for the issuer of the insurance policy.

Accepted Answer

A)  the principal-agent problem; moral hazard 
B)  asymmetric information; adverse selection 
C)  adverse selection; the principal-agent problem 
D)  moral hazard; adverse selection 
A)  the principal-agent problem; moral hazard 
B)  asymmetric information; adverse selection 
C)  adverse selection; the principal-agent problem 
D)  moral hazard; adverse selection

Exam 7: The Economics of Health Care

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

If a state requires all drivers to purchase auto insurance,insurance companies still face the problem of

In markets with asymmetric information,

The overall decline in death rates in the United States since 1981 was due to all of the following except

Of the following high-income countries,which has the lowest mortality ratio for cancer?

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

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.

Some economists believe that by making health care coverage mandatory for all individuals,the demand for medical services will likely ________,which will ________ the costs of health care.

What is moral hazard?

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

The largest government-run health care system in the world,with 1.7 million employees,is in

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

An analysis of the Patient Protection and Affordable Care Act (PPACA)by Medicare officials claims that additional annual health care spending over the next decade under the PPACA will

The health care system in Japan is referred to as ________,under which every resident of Japan is required to enroll in either a private or the government-provided health insurance program.

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

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

Some economists have proposed making the tax treatment of employer-provided health insurance the same as the tax treatment of individually purchased health insurance and out-of-pocket health care spending.Such changes would make it more likely that

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

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

Some economists believe that by making health care coverage mandatory for all individuals,the demand for medical services will likely ,which will the costs of health care.