Question 1

All of the following are part of the "taxes" provision of the Patient Protection and Affordable Care Act (PPACA)except

Accepted Answer

A)  pharmaceutical firms and health insurance firms will pay a new taxes. 
B)  investors earning more than $200,000 will pay a new tax on their investment income. 
C)  beginning in 2018, all taxes on employer-provided health insurance plans will be reduced or eliminated. 
D)  workers earning more than $200,000 will have their share of the Medicare payroll tax increase.

Question 2

In the United States from 1981 to 2009,deaths from all of the following declined substantially except

Accepted Answer

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

Question 3

Most doctors and hospitals operate as private businesses in all of the following countries except

Accepted Answer

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

Question 4

Typically,the higher the level of income per person in a country,the higher the level of spending per person on health care.This relationship between income and spending indicates that health care is a

Accepted Answer

A)  normal good. 
B)  inferior good. 
C)  luxury. 
D)  necessity.

Question 5

If a fire insurance company requires firms buying fire insurance to install automatic sprinkler systems,the insurance company is trying to reduce

Accepted Answer

A)  the problem of adverse selection. 
B)  the moral hazard problem. 
C)  sunk costs. 
D)  asymmetric information.

Question 6

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 7

Under the Small Business Health Options Program (SHOP)provision of the health care plan,a small firm's employees would be pooled with the employees of other small firms.When an insurance plan covers a large number of people,

Accepted Answer

A)  moral hazard is reduced. 
B)  adverse selection problems are reduced. 
C)  asymmetric information issues are eliminated. 
D)  negative externalities become more pronounced.

Question 8

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

Question 9

The number of people receiving Medicare is expected to ________ by the year 2030.

Accepted Answer

A)  reach 5 million by 
B)  stabilize 
C)  decline by 10 percent 
D)  grow to 80 million

Question 10

One effect of adverse selection in a market is that the equilibrium quantity of the product may
be smaller than it would have been if there were no information problems.

Accepted Answer

A) True 
 B)False

Question 11

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 12

In the United States,health care spending on people over age 65 is ________ on people aged 18 to 24.

Accepted Answer

A)  one third as much as 
B)  twice as much as 
C)  six times greater than 
D)  forty times greater than

Question 13

A goal of market-based reforms of the health care system is to give patients an incentive to pay more attention to the prices of medical services.This would tend to ________ economic efficiency by ________ the costs of medical services

Accepted Answer

A)  increase; increasing 
B)  increase; decreasing 
C)  decrease; increasing 
D)  decrease; decreasing

Question 14

In most circumstances,employees do not pay taxes on the value of health insurance their employers provide them.

Accepted Answer

A) True 
 B)False

Question 15

What is adverse selection?

Accepted Answer

A)  It refers to the private, self-interested actions people 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 make 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 16

If a buyer in an economic transaction has more information than the seller,the buyer benefits at the expense of the seller.This phenomenon is due to

Accepted Answer

A)  moral hazard. 
B)  adverse selection. 
C)  economically irrational behavior. 
D)  gains from trade.

Question 17

Which of the following is not an advantage to an insurance company of insuring a large group of people for health insurance?

Accepted Answer

A)  The characteristics of a large group are likely to reflect those of the entire population. 
B)  It is easier to accurately predict the number of claims for a group than for an individual. 
C)  When all group members pay the premium, the problem of moral hazard is reduced. 
D)  When all group members pay the premium, the problem of adverse selection is reduced.

Question 18

In the United States,the bulk of health care spending is paid by health insurance companies.Such a system is also called a third-party payer system where consumers of health care pay a nominal fee and the rest are paid by the health insurance provider.Why might such a system lead to an inefficient outcome?

Accepted Answer

A)  Health insurance companies have an incentive to control cost and therefore tend to deny consumers many cutting edge medical treatments. 
B)  Consumers have an incentive to over-consume health care services because they pay prices well below the cost of providing these services. 
C)  Physicians concerned that insurance companies may not approve payments tend not to order expensive tests for their patients. 
D)  Consumers fearing that excessive use of health care services may lead to a rise in insurance premiums tend to under-consume health care services.

Question 19

Suppose you see a 2006 Scion xB Sport Wagon advertised in the local newspaper for $8,500.If you knew the car was reliable,you would be willing to pay $10,000 for it.If you knew the car was unreliable,you would only be willing to pay $5,500 for it.Under what circumstances should you buy the car?

Accepted Answer

The answer of Suppose you see a 2006 Scion xB...

Question 20

If a doctor knows that an insurance company will pay for most of a patient's bill,the doctor has more of an incentive to require additional medical procedures and tests,even if the patient may not require them.This is an example of

Accepted Answer

A)  moral hazard. 
B)  the principle-agent problem. 
C)  asymmetric information. 
D)  adverse selection.

Exam 7: The Economics of Health Care

All of the following are part of the "taxes" provision of the Patient Protection and Affordable Care Act (PPACA) except