Question 1

What is adverse selection?

Accepted Answer

Adverse selection refers to a

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

In 2015,the average life expectancy at birth in the United Kingdom and other high-income countries was around ________ years.

Accepted Answer

A) 60 
B) 70 
C) 80 
D) 90 
A) 60 
B) 70 
C) 80 
D) 90

Question 4

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.The efficient equilibrium price is

Accepted Answer

A) $60. 
B) $50. 
C) $40. 
D) < $40. 
A) $60. 
B) $50. 
C) $40. 
D) < $40.

Question 5

Typically,the ________ in a country,the higher the level of spending per person on health care.

Accepted Answer

A) higher the level of income per person 
B) larger the population 
C) higher the level of income taxes 
D) lower the median age of the population 
A) higher the level of income per person 
B) larger the population 
C) higher the level of income taxes 
D) lower the median age of the population

Question 6

The principal-agent problem is a problem

Accepted Answer

A) caused by a person (principal)who hires an agent to act on his behalf but is unwilling to delegate authority to the agent to carry out the task in the best possible way. 
B) caused by agents pursuing their own interests rather than the interests of the principals who hired them. 
C) of the power system of boss and subordinate where the boss (principal)exerts influence over his subordinates (agents)using punishment or threat. 
D) that exists when a person (principal)has more information about the task than the agent he hires to perform the task. 
A) caused by a person (principal)who hires an agent to act on his behalf but is unwilling to delegate authority to the agent to carry out the task in the best possible way. 
B) caused by agents pursuing their own interests rather than the interests of the principals who hired them. 
C) of the power system of boss and subordinate where the boss (principal)exerts influence over his subordinates (agents)using punishment or threat. 
D) that exists when a person (principal)has more information about the task than the agent he hires to perform the task.

Question 7

Growth in labor productivity in the economy as a whole has been ________ labor productivity in health care.

Accepted Answer

A) approximately equal to 
B) slightly faster than 
C) almost twice as slow as 
D) more than twice as fast as 
A) approximately equal to 
B) slightly faster than 
C) almost twice as slow as 
D) more than twice as fast as

Question 8

Why is the study of asymmetric information associated with the market for "lemons"?

Accepted Answer

A) Sellers of citrus fruit-lemons,oranges,grapefruit-know the difference between bad fruit and good fruit;buyers do not have this information. 
B) Because there is little advertising in the market for lemons,buyers have difficulty determining the quality of lemons before they are purchased. 
C) Potential buyers of used cars have difficulty separating good used cars from bad used cars;bad used cars are often referred to as "lemons." 
D) Most sellers of used cars have less information about their cars than the dealers who buy them;used cars are often referred to as "lemons." 
A) Sellers of citrus fruit-lemons,oranges,grapefruit-know the difference between bad fruit and good fruit;buyers do not have this information. 
B) Because there is little advertising in the market for lemons,buyers have difficulty determining the quality of lemons before they are purchased. 
C) Potential buyers of used cars have difficulty separating good used cars from bad used cars;bad used cars are often referred to as "lemons." 
D) Most sellers of used cars have less information about their cars than the dealers who buy them;used cars are often referred to as "lemons."

Question 9

"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 10

In the United States in 2014,about seventy percent of those who were not covered by health insurance

Accepted Answer

A) are single and unemployed. 
B) live in families in which at least one member has a job. 
C) live in families in which all members are unemployed. 
D) are retired from the workforce. 
A) are single and unemployed. 
B) live in families in which at least one member has a job. 
C) live in families in which all members are unemployed. 
D) are retired from the workforce.

Question 11

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 decrease.

Accepted Answer

A) True 
 B)False

Question 12

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 13

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 14

If a state requires all drivers to buy auto insurance,the problem of adverse selection is eliminated.

Accepted Answer

A) True 
 B)False

Question 15

What has happened to health care's share of gross domestic product in the United States since 1965? How does this compare to what has happened to out-of-pocket spending on health care as a percentage of all spending on health care?

Accepted Answer

Health care's share of gross domestic pr

Question 16

Health care makes 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 17

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 18

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

Question 19

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.The efficient quantity of medical services is

Accepted Answer

A) 400. 
B) 800. 
C) 1,200. 
D) > 1,200. 
A) 400. 
B) 800. 
C) 1,200. 
D) > 1,200.

Question 20

Of the following high-income countries,which has the highest life expectancy at birth?

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

Exam 7: The Economics of Health Care

What is adverse selection?

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

In 2015,the average life expectancy at birth in the United Kingdom and other high-income countries was around ________ years.

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.The efficient equilibrium price is

Typically,the ________ in a country,the higher the level of spending per person on health care.

The principal-agent problem is a problem

Growth in labor productivity in the economy as a whole has been ________ labor productivity in health care.

Why is the study of asymmetric information associated with the market for "lemons"?

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

In the United States in 2014,about seventy percent of those who were not covered by health insurance

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 decrease.

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.

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

If a state requires all drivers to buy auto insurance,the problem of adverse selection is eliminated.

What has happened to health care's share of gross domestic product in the United States since 1965? How does this compare to what has happened to out-of-pocket spending on health care as a percentage of all spending on health care?

Health care makes up ________ of the U.S.economy.

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

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.The efficient quantity of medical services is

Of the following high-income countries,which has the highest life expectancy at birth?

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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