Question 1

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 2

What are the main sources of health insurance in the United States?

Accepted Answer

The answer of What are the main sources of health...

Question 3

Which of the following parties is likely to have the most information about the health of an individual who is trying to purchase a health insurance policy?

Accepted Answer

A) the company that issues the health insurance policy 
B) the individual who is applying for the health insurance policy 
C) the employer of the individual who is trying to purchase the health insurance policy 
D) All parties in the health insurance market have access to the same level of information.

Question 4

Uninsured patients receiving treatments at hospital emergency rooms that could have been provided less expensively at doctor's offices account for ________ of health care costs in the United States.

Accepted Answer

A) between 1 and 4 percent 
B) approximately 25 percent 
C) almost 40 percent 
D) between 15 and 20 percent

Question 5

The Congressional Budget Office estimates that most of the increase in federal spending on Medicare and Medicaid will be due to

Accepted Answer

A) the aging population. 
B) increases in the cost of providing health care. 
C) increases in immigration. 
D) declining income levels.

Question 6

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 7

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 8

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 9

Moral hazard refers to the actions people take after they have entered into a transaction that make the other party to the transaction worse off.

Accepted Answer

A) True 
 B)False

Question 10

A majority of people in the United States have private health insurance.

Accepted Answer

A) True 
 B)False

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

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.

Question 13

Economists who support market-based reforms for health care believe that increased competition among providers of health care would ________ costs and ________ economic efficiency.

Accepted Answer

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

Question 14

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 15

The situation in which one party to a transaction takes advantage of knowing more than the other party to the transaction is known as asymmetric information.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

What is the principal-agent problem?

Accepted Answer

A) It is a problem 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) It is a problem caused by agents pursuing their own interests rather than the interests of the principals who hired them. 
C) It is a problem of the power system of boss and subordinate where the boss (principal)exerts influence over his subordinates (agents)using punishment or threat. 
D) It is a problem that exists when a person (principal)has more information about the task than the agent he hires to perform the task.

Question 18

Those who favor changes in the market for health care that would make it more like the markets for other goods and services are generally in favor of universal health care coverage.

Accepted Answer

A) True 
 B)False

Question 19

By the year 2019,health care's share of gross domestic product in the United States is projected to

Accepted Answer

A) return to its 1995 level. 
B) have declined to only 6.5 percent. 
C) be more than three times as high as it was in 1965. 
D) reach a level of 75 percent.

Question 20

Suppose that in a market for used cars,there are good used cars and bad used cars (lemons).Consumers are willing to pay as much as $6,000 for a good used car but only $1,000 for a lemon.Sellers of good used cars value their cars at $5,000 each and sellers of lemons value their cars at $800 each.Buyers cannot tell if a used car is reliable or is a lemon.Based on this information,what is the likely outcome in the market for used cars?

Accepted Answer

A) Sellers of good used cars will drop out of the market. 
B) Sellers of good used cars will incur losses. 
C) Sellers of lemons will drop out of the market. 
D) Used cars will sell for $3,000.

Exam 5: The Economics of Health Care

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

What are the main sources of health insurance in the United States?

Which of the following parties is likely to have the most information about the health of an individual who is trying to purchase a health insurance policy?

Uninsured patients receiving treatments at hospital emergency rooms that could have been provided less expensively at doctor's offices account for ________ of health care costs in the United States.

The Congressional Budget Office estimates that most of the increase in federal spending on Medicare and Medicaid will be due to

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

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

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,

Moral hazard refers to the actions people take after they have entered into a transaction that make the other party to the transaction worse off.

A majority of people in the United States have private health insurance.

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

What is moral hazard?

Economists who support market-based reforms for health care believe that increased competition among providers of health care would costs and economic efficiency.

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,

The situation in which one party to a transaction takes advantage of knowing more than the other party to the transaction is known as asymmetric information.

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

What is the principal-agent problem?

Those who favor changes in the market for health care that would make it more like the markets for other goods and services are generally in favor of universal health care coverage.

By the year 2019,health care's share of gross domestic product in the United States is projected to