Question 1

________ occurs when actions taken by one party to a transaction are different from what the other party expected at the time of the transaction.

Accepted Answer

A) Adverse selection 
B) Risk aversion 
C) Fraud 
D) Moral hazard 
A) Adverse selection 
B) Risk aversion 
C) Fraud 
D) Moral hazard

Question 2

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

Accepted Answer

1.The wage an employer pays employees is

Question 3

Because of the positive externality of vaccinations,economic efficiency would be improved

Accepted Answer

A) if fewer people were vaccinated. 
B) if more people were vaccinated. 
C) only if all people were vaccinated. 
D) only if no people were vaccinated. 
A) if fewer people were vaccinated. 
B) if more people were vaccinated. 
C) only if all people were vaccinated. 
D) only if no people were vaccinated.

Question 4

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

Accepted Answer

A) slightly lower than 
B) significantly higher than 
C) significantly lower than 
D) comparable to 
A) slightly lower than 
B) significantly higher than 
C) significantly lower than 
D) comparable to

Question 5

Adverse selection is a situation in which one party to a transaction takes advantage of knowing more than the other party to the transaction.

Accepted Answer

A) True 
 B)False

Question 6

Two key consequences of asymmetric information are adverse selection and moral hazard.Define each concept,provide one example of each,and explain how the two concepts differ.

Accepted Answer

Adverse selection is the situation in wh

Question 7

Based on the current rate of growth,health care spending as a percentage of GDP through Medicare,Medicaid,and other U.S.government programs is expected to

Accepted Answer

A) stabilize within the next 20 years. 
B) account for a majority of spending as a percentage of GDP within 5 years. 
C) slow down during this decade. 
D) double over the next 40 years. 
A) stabilize within the next 20 years. 
B) account for a majority of spending as a percentage of GDP within 5 years. 
C) slow down during this decade. 
D) double over the next 40 years.

Question 8

________ tended to increase spending on health care in the United States.

Accepted Answer

A) The aging of the U.S.population,rather than advances in medical technology,has 
B) Advances in medical technology,rather than the aging of the U.S.population,has 
C) The aging of the U.S.population,as well as advances in medical technology,have 
D) Neither the aging of the U.S.population,nor advances in medical technology,have 
A) The aging of the U.S.population,rather than advances in medical technology,has 
B) Advances in medical technology,rather than the aging of the U.S.population,has 
C) The aging of the U.S.population,as well as advances in medical technology,have 
D) Neither the aging of the U.S.population,nor advances in medical technology,have

Question 9

How do current tax laws in the United States favor employer-based health care insurance?

Accepted Answer

A) Individuals who receive health insurance benefits are allowed to deduct the value of these benefits from their taxable income. 
B) Employers who provide health insurance benefits are reimbursed by the government and are not taxed on these reimbursements. 
C) Individuals who receive health insurance benefits do not pay taxes on the value of these benefits. 
D) Health insurance companies that provide insurance to employers are subject to a lower tax rate than those insurance companies that provide insurance to private individuals. 
A) Individuals who receive health insurance benefits are allowed to deduct the value of these benefits from their taxable income. 
B) Employers who provide health insurance benefits are reimbursed by the government and are not taxed on these reimbursements. 
C) Individuals who receive health insurance benefits do not pay taxes on the value of these benefits. 
D) Health insurance companies that provide insurance to employers are subject to a lower tax rate than those insurance companies that provide insurance to private individuals.

Question 10

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

Accepted Answer

A) 200. 
B) 500. 
C) 700. 
D) >700. 
A) 200. 
B) 500. 
C) 700. 
D) >700.

Question 11

Consider a used car market in which half the cars are good and half are bad (lemons).If buyers are rational,the prices being offered for used cars will result in

Accepted Answer

A) an equal proportion of a good cars and lemons being sold in an efficient market. 
B) a larger proportion of good cars being sold and consequently,consumer surplus is increased. 
C) a larger proportion of lemons being sold and consequently,producer surplus is increased. 
D) an equal proportion of good cars and lemons being sold in an inefficient market. 
A) an equal proportion of a good cars and lemons being sold in an efficient market. 
B) a larger proportion of good cars being sold and consequently,consumer surplus is increased. 
C) a larger proportion of lemons being sold and consequently,producer surplus is increased. 
D) an equal proportion of good cars and lemons being sold in an inefficient market.

Question 12

The U.S.Bureau of Labor Statistics forecasts that ________ fastest-growing occupations over the next 10 years will be in health care.

Accepted Answer

A) over 95 percent of the 
B) less than 2 of the 10 
C) 13 of the 20 
D) just under half of the 
A) over 95 percent of the 
B) less than 2 of the 10 
C) 13 of the 20 
D) just under half of the

Question 13

In the United States in 2014,the percentage of people who received health insurance through their employer was about

Accepted Answer

A) 15%. 
B) 36%. 
C) 55%. 
D) 83%. 
A) 15%. 
B) 36%. 
C) 55%. 
D) 83%.

Question 14

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 15

Adverse selection will occur in a market as a result of

Accepted Answer

A) asymmetric information. 
B) moral hazard. 
C) the sale of "lemons." 
D) rational ignorance. 
A) asymmetric information. 
B) moral hazard. 
C) the sale of "lemons." 
D) rational ignorance.

Question 16

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 17

In the United States from 1981 to 2013,deaths from ________ increased largely due to the effects of increasing obesity.

Accepted Answer

A) strokes 
B) cancer 
C) heart attacks 
D) diabetes 
A) strokes 
B) cancer 
C) heart attacks 
D) diabetes

Question 18

Which of the following did not contributed to the overall decline in death rates in the United States since 1981?

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 19

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

Accepted Answer

A) eliminates asymmetric information for the insurer,but not for the insured. 
B) eliminates asymmetric information for the insured,but not for the insurer. 
C) eliminates asymmetric information for both the insurer and the insured. 
D) reduces,but does not eliminate,,asymmetric information for both the insurer and the insured. 
A) eliminates asymmetric information for the insurer,but not for the insured. 
B) eliminates asymmetric information for the insured,but not for the insurer. 
C) eliminates asymmetric information for both the insurer and the insured. 
D) reduces,but does not eliminate,,asymmetric information for both the insurer and the insured.

Question 20

Briefly describe changes in life expectancy,average height,and infant mortality in the United States since 1850.

Accepted Answer

Life expectancy has increased from 38.3

Exam 7: The Economics of Health Care

________ occurs when actions taken by one party to a transaction are different from what the other party expected at the time of the transaction.

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

Because of the positive externality of vaccinations,economic efficiency would be improved

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

Adverse selection is a situation in which one party to a transaction takes advantage of knowing more than the other party to the transaction.

Two key consequences of asymmetric information are adverse selection and moral hazard.Define each concept,provide one example of each,and explain how the two concepts differ.

Based on the current rate of growth,health care spending as a percentage of GDP through Medicare,Medicaid,and other U.S.government programs is expected to

________ tended to increase spending on health care in the United States.

How do current tax laws in the United States favor employer-based health care insurance?

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

Consider a used car market in which half the cars are good and half are bad (lemons).If buyers are rational,the prices being offered for used cars will result in

The U.S.Bureau of Labor Statistics forecasts that ________ fastest-growing occupations over the next 10 years will be in health care.

In the United States in 2014,the percentage of people who received health insurance through their employer was about

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.

Adverse selection will occur in a market as a result of

In the principal-agent relationship,the agent is

In the United States from 1981 to 2013,deaths from ________ increased largely due to the effects of increasing obesity.

Which of the following did not contributed to the overall decline in death rates in the United States since 1981?

Briefly describe changes in life expectancy,average height,and infant mortality in the United States since 1850.

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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