Question 1

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.

Question 2

Vaccinating people against a communicable disease such as influenza not only reduces the chances that the person vaccinated will catch the disease but also reduces the probability that an epidemic of the disease will occur.Which of the following statements is true?

Accepted Answer

A) Reducing the chances that the person vaccinated will catch the disease is a private cost while reducing the probability of an influenza epidemic is a social benefit. 
B) Vaccinating people against communicable diseases yields private benefits in excess of social benefits. 
C) Reducing the chances that the person vaccinated will catch the disease is a private benefit while reducing the probability of an influenza epidemic is a social benefit. 
D) The benefits of the influenza vaccination outweigh the costs.

Question 3

When people who buy insurance change their behavior after the purchase because they are protected from loss by the insurance, the insurance market is said to face the problem of

Accepted Answer

A) moral hazard. 
B) adverse selection. 
C) asymmetric information. 
D) economic irrationality.

Question 4

Figure 7-2
  
Figure 7-2 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 7-2.The efficient quantity of medical services is

Accepted Answer

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

Question 5

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

Question 6

Of the following high-income countries, which has the lowest number of MRI units per 1 million population?

Accepted Answer

A) Canada 
B) Japan 
C) the United Kingdom 
D) the United States

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.

Question 8

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.

Question 9

Adverse selection occurs in the market for used cars because used car buyers

Accepted Answer

A) have more information than used car sellers. 
B) have less information than used car sellers. 
C) have less incentive to maintain the value of their cars than new car buyers. 
D) tend to have more accidents than new car buyers.

Question 10

In the United States from 1981 to 2013, deaths from all of the following declined substantially except

Accepted Answer

A) cancer. 
B) kidney disease. 
C) heart attacks. 
D) strokes.

Question 11

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

Accepted Answer

A) additional moral hazard. 
B) positive externalities. 
C) greater asymmetric information. 
D) more adverse selection.

Question 12

Better health allows people to work harder, which raises a country's total income.This indicates that in effect, better health

Accepted Answer

A) is a primary cause of price increases. 
B) reduces the incentive to work. 
C) shifts out a country's production possibilities frontier. 
D) increases consumer surplus.

Question 13

Of the following U.S.presidents, which was the first to propose a national health insurance program to Congress?

Accepted Answer

A) Barack Obama 
B) Bill Clinton 
C) John F. Kennedy 
D) Harry Truman

Question 14

Between 1981 and 2013, deaths from cancer have increased in the United States.

Accepted Answer

A) True 
 B)False

Question 15

A contract under which a buyer agrees to make payments in exchange for the provider agreeing to pay some or all of the buyer's medical bills is referred to as

Accepted Answer

A) a fee-for-service plan. 
B) the Affordable Care Act. 
C) a deductible. 
D) health insurance.

Question 16

In addition to covering the costs of unpredictable events, health insurance typically covers many planned expenses, such as routine checkups, annual physicals, and the cost of vaccinations.Because of this, health insurance

Accepted Answer

A) discourages overuse of health care services. 
B) encourages overuse of health care services. 
C) generates an efficient quantity of health care services. 
D) is not accepted by most doctors and hospitals.

Question 17

Automobile insurance companies have a problem with people who buy insurance and then drive recklessly or take less care to avoid losses after being insured.In other words, the automobile insurance market is subject to

Accepted Answer

A) asymmetric information. 
B) market signaling. 
C) moral hazard. 
D) adverse selection.

Question 18

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

Question 19

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.

Question 20

Figure 7-2
  
Figure 7-2 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 7-2.The efficient price of medical services is

Accepted Answer

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

Exam 7: The Economics of Health Care