Health Econ Final

The rate of return on training for physicians in the United States, when compared to that for most other educational groups (college graduates, PhDs) a. a bit higher b. similar c. a lot higher d. lower

c. a lot higher

co-insurance

a percent that an insurance company must pay, opposite of co-payment

It is flu season, and you are trying to decide if you should get a flu shot. When you are healthy, you earn $144 a day, but if you become ill, you will only earn $100 a day. There is a 25% chance you will get the flu without a flu shot. If you do receive the flu shot, then you definitely will not get the flu. What is the actuarially fair price for the flu shot given this information? a. $11 b. $22 c. $33 d. $44

a. $11

if you know total fixed is $200, total variable cost is $600, and total product is 4 units, then average total cost must be: a. $200 b. $250 c. $800 d. $3200

a. $200

If you know that total fixed cost is $200, total variable cost is $600, and total product is 4 units, then average total cost must be: a. $200 b. $250 c. $800 d. $3200

a. $200 TFC + TVC / TP = 200 + 600/ 4 + 200

if the deductible is $200 and the co-payment is 20%, on a covered expense of $1200 the individual will pay ____ and their insurance company will pay _____ . a. $400; $800 b. $600; $600 c. $200; $1000 d. $800; $400

a. $400; $800

If the deductible is $500 and the co-payment is 20%, on a covered expense of $1000 the individual will pay _____ and their insurance company will pay ______. a. $600; $400 b. $400; $600 c. $500; $500 d. $500; $600

a. $600; $400

If a person has a deductible of $300 and must pay $500 out of a $1,300 health care expense in a year, then their co-payment rate is a. 20% b. 5% c. 10% d. 50%

a. 20%

variable costs are: a. sunk costs b. costs that change every day c. costs that change with the level of production d. the change in total cost due to the production of an additional unit of output

c. costs that change with the level of production

Suppose someone knew that the probability of incurring a $10,000 medical expense was 5% and the odds of being healthy and incurring no expenses was 95%. If they used that information to compare the expected cost to them ($500) with the $500 premium it would cost to get full coverage and decided to buy the insurance but only if the price went no higher than economists would say they are a. risk neutral b. irrational c. risk loving d. risk averse

a. risk neutral

Suppose someone knew that the probability of incurring a $10,000 medical expense was 5% and the odds of being healthy and incurring no expenses was 95%. If they used that information to compare the expected cost to them ($500) with the $600 premium it would cost to get full coverage and decided to buy the insurance then economists would say they are a. risk-averse b. risk-loving c. risk-neutral d. irrational

a. risk-averse

as it applies to health insurance, the adverse selection problem is the tendency for a. the most likely to collect on insurance, i.e., sick people, to buy it b. sellers to price-discriminate c. those who buy insurance to take less precaution in avoiding illness d. sellers to restrict output and charge high prices

a. the most likely to collect on insurance, i.e., sick people, to buy it

deductible

amount of covered expense that an individual will have to pay before the insurance company pays nothing

marginal output of labor

an increase in output resulting from employing one more unit of labor

pure competition

an industry comprised of a large number of sellers producing a standardized product

refer to the above graph, given the medicare assignment rate of Pm, the total quantity of care offered would be: a. Q1 b. Q2 c. Q3 d. Q4

b. Q2

If a person must pay 20% of a covered health care expense, this is called their: a. deductible b. co-payment c. maximum out-of-pocket d. lifetime maximum

b. co-payment

the majority of people with private health insurance get it a. along with one other person b. individually c. in groups d. at the grocery store

c. in groups

physician-induced demand a. increases medical prices b. increases use of medical services c. shifts the demand curve to the right d. both a and b e. all of the above

e. all of the above response feedback: physicians-induced demand causes the demand curve to shift rightward, thereby increasing both price and quantity

8. For GPs (general practitioners) to play an effective coordinator's role (rather than a gatekeeper's) in a health care organization, they must be made financially responsible for their patients' care. Thus, they should be paid by: a. block budget based on past care expenses b. per diem (or per period of stay at hospital) c. fee-for-service) d. salary e. capitation

e. capitation

Which of the following would increase the supply of physicians? a. increasing the cost of attending medical school b. making it easier for plaintiffs to prove medical malpractice claims c. increasing the medical school entrance requirements to include 15 hours of economics d. paying medical schools to eliminate residency opportunities on some specialtues e. scholarships and grants cover medical school tuition

e. more scholarships and grants to cover medical school tuition response feedback: it would entice more people to enter into medicine

monopolistic competition

many differentiated firms and intense price competition

capitation

payment of a fee or grant to a doctor, school, or other person or body, providing services to a number of people

co-payment

percentage of covered expense that an individual will have to pay (after the deductible is met.)

moral hazard problem

purchasing additional medical services because are covered by health insurance

refer to the above graph. given the medicare assignment rate of Pm, the price charged from patients with private insurance would be: a. P1 b. P3 c.Pm d. P4

a. P1

which of the following statements is correct? a. The demand curve for a purely competitive firm is perfectly elastic, but the demand curve for a purely competitive industry is downsloping. b. The demand curve for a purely competitive firm is downsloping, but the demand curve for a purely competitive industry is perfectly elastic. c. The demand curves are downsloping for both a purely competitive firm and a purely competitive industry. d. The demand curves are perfectly elastic for both a purely competitive firm and a purely competitive industry.

a. The demand curve for a purely competitive firm is perfectly elastic, but the demand curve for a purely competitive industry is downsloping.

For a risk-averse consumer a. The expected utility of wealth is less than the utility of expected wealth b. There is no relationship between the expected utility of wealth and the utility of expected wealth c. The expected utility of wealth is greater than the utility of expected wealth d. The expected utility of wealth is equal to the utility of expected wealth

a. The expected utility of wealth is less than the utility of expected wealth

which of the following will not change (shift) the demand for office visits to the physician? a. a change in the price of an office visit b. television advertising by drug manufacturers to promote a new over-the-counter influenza treatment c. they all change the demand for office visits d. unusually cold and damp weather during the winter e.layoffs at the local plant causing a decrease in the number of people with health insurance in the community

a. a change in the price of an office visit response feedback: this is a change in quantity demanded, not a change in demand

When the patient lacks information, the physician demand curve _____. a. becomes less elastic b. becomes unitary elastic c. becomes more elastic d. becomes perfectly elastic

a. becomes less elastic response feedback: when patients lack information, they must rely more on the choices made by the physician and thus faces few choices. fewer options to choose make demand more inelastic (or less elastic)

price elasticity of demand of physician-firms is a. between approximately -1.5 and -5.0 b. between approximately -1.0 and -1.5 c. between approximately -0.5 and -1.0 d. between approximately 0 and -0.5

a. between approximately -1.5 and -5.0

when an insurer promises to pay 30% of treatment costs, this amount is known as a a. co-insurance b. deductible c. stop-loss d. lifetime maximum

a. co-insurance response feedback: this is an example of a co-insurance rate where the insurance company pays 30% of the cost and the patient says 70% of the cost

the shift from solo to group practice is primarily due to a. economies of scale b. the need for professional collaboration c. one-stop shopping for patients d. only a and b above

a. economies of scale

Advertising in the physician market is a a. fixed cost b. marginal cost c. total cost d. variable cost

a. fixed cost

in the physician services market, the actual price a physician charges the insurance company is a. higher than what it would be if the patient didn't have insurance b. cannot be determined because it is the insurance c. the same as it would be if the patient didn't have insurance d. lower than what it would be if the patient didn't have insurance

a. higher than what it would be if the patient didn't have insurance

If a person must pay for all health care expenses in excess of $1,000,000, this is called their a. lifetime maximum b. maximum out-of-pocket c. deductible d. co-payment

a. lifetime maximum

the marginal cost curve is upward sloping because: a. marginal productivity is falling with production b. marginal productivity is rising with production c. total productivity rising with production d. total productivity is failing with production

a. marginal productivity is falling with production response feedback: the marginal cost is increasing with production because the marginal product of the next input is decreasing

being risk averse means that you would be willing to pay ___ than the expected outcome in order to guarantee an outcome a. more b. less c. more or less d. no more or less

a. more

It is flu season. When you are healthy, you will earn $144 a day, but if you become ill, you will only earn $100 a day. There is a 25% chance you will get the flu. If your utility function is equal to where W is equal to wealth, then what is your expected utility of catching the flu? a. $111 b. $11.5 c. $10.5 d. $133

b. $11.5

Lucy Ramirez has $22,500 in income. After a recent trip to Cuba, she discovers that there is a 25% chance of acquiring Cubanitis. The disease is 100% curable but requires the Fidelonomy procedure (at a cost of $12,500). The Kuba-Kuba Insurance Company offers a policy that will cover the Fidelonomy. The premium they charge is $4,000. Of this premium, the pure premium is __________ and the loading fee is _______. a. $875; $3125 b. $3,125; $875 c. not enough information to answer d. $4,000; $0

b. $3,125; $875 response feedback: The pure premium is the actuarially fair price (or expected cost), which is equal to $12,500*(0.25) = $3,125. The loading fee is the difference between the full premium and the pure premium, $4,000 - $3,125 = $875.

In this figure, suppose that Q 0 = 10 office visits, Q 1 = 20 office visits, P 0 = 10, and P 1 = 2: In the figure above, the change in insurance coverage causes a social welfare loss equal to: a. 100 b. 40 c. 60 d. 20

b. 40

In this figure, suppose that Q0 = 10 office visits, Q1 = 20 office visits, P0 = 10, and P1 = 2: In the figure above, the change in consumer's private benefits due to moral hazard (area under the demand curve) would be: a. 30 b. 40 c. 80 d. 60

b. 40 response feedback: The benefit increase is the area under the demand curve and above the effective price. The effective price in this case the out-of-pocket expense (or the co-pay) paid by the patient which is $2. Therefore, the increased benefit to the patient is the triangular area ACD which can be calculated to be $40.

When a dental office reports that the productivity of 15 workers working at the office is 12 patients per month per worker, it is referring to the: a. total product of labor b. average product of labor c. marginal product of labor d. total product of capital

b. average product of labor

from an economic point view, when a number of physicians decided to consolidate their solo practice into large group practice, they enjoy: a. more medical collaboration b. economies of scale c. delegating administrative responsibilities to others d. all of the above

b. economies of scale

Cash expenditures a firm makes to pay for resources are called: a. implicit costs b. explicit costs c. normal profit d. opportunity costs

b. explicit costs

hospitals compete mainly in a ____ market a. quality market correct b. geographic market c. product market d. price market

b. geographic market

Marginal product of labor refers to the: a. last unit of output produced by labor at the end of each period b. increase in output resulting from employing one more unit of labor c. total output divided by the number of labor employed d. smallest unit of the output produced by labor

b. increase in output resulting from employing one more unity of labor

The shift from solo to group practice a. has no impact on the degree of market power for physicians b. increases the degree of market power for physicians c. is mainly determined by demand considerations d. decreases the degree of market power for physicians

b. increases the degree of market power for physicians

the unemployed are disproportionately represented among the uninsured because: a. a large percentage of the unemployed are heads of single-parent families b. most workers obtain health insurance through their employers c. one must be working to qualify for medicaid d. most are young and in excellent health, so they choose not to purchase health insurance

b. most workers obtain health insurance through their employers

As it applies to health insurance, the adverse selection problem is the tendency for a. a large percentage of the unemployed are heads of single-parent families. b. most workers obtain health insurance through their employers. c. one must be working to qualify for Medicaid. d. most are young and in excellent health, so they choose not to purchase health insurance.

b. most workers obtain health insurance through their employers.

a co-payment is the a. amount of covered expense that an individual will have to pay before the insurance company pays anything b. percentage of a covered expense that an individual will have to pay (after the deductible is met.) c. amount of covered expense that an insurance company will have to pay before the individual pays anything d. percentage of a covered expense that an insurance company will have to pay (after the deductible is met.)

b. percentage of a covered expense that an individual will have to pay (after the deductible is met.)

the demand schedule or curve confronted by the individual, purely competitive firm is: a. relatively elastic, that is, the elasticity coefficient is greater than unity b. perfectly elastic c. relatively inelastic, that is, the elasticity is less than unity d. perfectly inelastic

b. perfectly elastic

Which of these would be likely to reduce the extent of supplier-induced demand? a. an increase in the number of physicians coming out of medical schools b. physicians being remunerated on "capitation" basis rather than a "fee for service" basis c. a reduction in the medical and health knowledge of the general population d. less advertising and other competitive behaviors physicians

b. physicians being remunerated on "capitation" basis rather than a "fee for service" basis response feedback: if physicians are paid by the number of patients rather than the number of services, then there is no incentive to expand services

Purchasing additional medical services because you are covered by health insurance is an illustration of a. the adverse selection problem b. the moral hazard problem c. a failure of the market for externalities d. the existence of spillover benefits

b. the moral hazard problem

implicit costs are: a. equal to total fixed costs b. comprised entirely of variable costs c. "payments" for self-employed resources d. always greater in the short run than in the long run

c. "payments" for self-employed resources

In this figure, suppose that Q 0 = 10 office visits, Q 1 = 20 office visits, P 0 = 10, and P 1 = 2: In the above figure, the increased expenditure (regardless of who pays it) born by the insurance company is: a. $300 b. $50 c. $100 d. $200

c. $100

refer to the diagram. to maximize profit or minimize losses, this firm will produce: a. K units at price C b. D units at price J c. E units at price A d. E units at price B

c. E units at price A

refer to the above graph. Given the medicare assignment rate of Pm, the price charged from patients with medicare would be: a. P1 b. P3 c. Pm d. P4

c. Pm

the average fixed cost curve is a. u-shaped with output b. always increasing with output c. always decreasing with output d. none of the above

c. always decreasing with output response feedback: average cost is always decreasing with output. fixed cost is the cost incurred to start a firm, but it does not change with the quantity produced. Average fixed cost = (fixed cost)/quantity, which is always decreasing

economies of scale: a. might be more easily realized in an emergency room rather than a physician's office b. depend on spreading of minimal fixed costs over a number of procedures c. depend on the spreading of high fixed costs over a number of procedures d. depend on the spreading of high variable costs over a number of procedures e. depend on the spreading of high marginal costs over a number of procedures

c. depend on the spreading of high fixed costs over a number of procedures response feedback: economies of scale occurs when average cost declines with increased production. this is mainly due to a large fixed costs spread over increasingly expanded output.

over the past few decades, the market structure of physicians services has become a. more specialized b. less concentrated c. more concentrated d. less specialized

c. more concentrated

allowing advertising in the physician services market, makes the demand for those services a. zero b. unitary elastic c. more elastic d. less elastic

c. more elastic

Suppose someone knew the probability of incurring a $10,000 medical expense was 5% and the odds of being healthy and incurring no expenses was 95%. If they used that information to compare the expected cost to them ($500) with the $400 premium it would cost to get full coverage and decided not to buy the insurance then economists would say they are a. irrational b. risk neutral c. risk loving d. risk averse

c. risk loving

A public option in the health insurance market has been proposed as a remedy to the increasing cost of health care. This proposal, requiring all citizens to purchase health insurance, would decrease health insurance premiums on average by mitigating a. the moral hazard problem b. a failure of the market for externalities c. the adverse selection problem d. the existence of spillover benefits

c. the adverse selection problem

Which of the following is NOT a factor in determining the supply of physicians? a. FMGs b. USMGs c. the number of doctors demanded by hospital d. death and retirements of doctors

c. the number of doctor demanded by a hospital response feedback: the number of doctors demanded by hospital is demanded issue

explicit costs

cash expidentures a firm makes to pay for resources

variable costs

costs that change with the level of production

If the deductible is $400 and the co-payment is 25%, on a covered expense of $800 the individual will pay _____ and their insurance company will pay ______. a. $500; $500 b. $500; $100 c. $300; $500 d. $500; $300

d. $500; $300

If the demand for hospital visits in a city are 10,000 and a typical physician office can accommodate 50 patients per day, the number of physician offices is a. cannot be determined b. 20 c. 2000 d. 200

d. 200 response feedback: 10,000/5 = 200 firms

Purchasing additional medical services because you are covered by health insurance is an illustration of a. The existence of spillover benefits b. A failure of the market for externalities c. The adverse selection problem d. The moral hazard problem

d. The moral hazard problem

Which of the following persons is most likely to be insured for health care? a. a part-time groundskeeper for a small manufacturing plant b. a minimum-wage teenager working for a fast-food restaurant c. an unemployed retail clerk d. a skilled worker employed by a large multinational corporation

d. a skilled worker employed by a large multinational corporation

a specific opportunity cost of attending medical school is: a. the tuition fee b. the foregone income c. the sleep deprivation and fatigue during arduous internships d. all of the above

d. all of the above

which of the following policies limits the extent of moral hazard in the health insurance market? a. stop loss b. large deductibles c. varying co-insurance rates d. all of the above e. none of the above

d. all of the above response feedback: a stop loss places a lifetime cap on health care expenditures, causing patients to become more price sensitive. large deductibles place the cost of health care on the patient initially, causing patients to be more sensitive about prices. varying or increasing co-insurance rates can be used so that patients bear a portion of the cost.

a deductible is the a. percentage of a covered expense that an individual will have to pay b. percentage of a covered expense that an insurance company will have to pay c. count of covered expense that an insurance company will have to pay before the individual pays nothing d. amount of covered expense that an individual will have to pay before the insurance company pays nothing

d. amount of covered expense that an individual will have to pay before the insurance company pays nothing

Diminishing marginal returns occurs as a firm adds more variable inputs to at least one fixed input because: a. the ability or quality of the variable inputs hired decreases as more are hired b. the firm must lower the price of its product when it produces more units of output c. the per unity cost it must pay for variable inputs increases as more inputs are hired d. as more variable inputs are hired, the amount of the fixed input per variable input decreases

d. as more variable inputs are hired, the amount of the fixed input per variable input decreases

physicians' pay in the United States is high due to a. high training costs b. high return on training c. high regards for the status of physicians d. both a and b e. all of the above

d. both a and b response feedback: training and returns from education explain virtually all of the high income for physicians

If a person must pay the first $300 of covered health care expenses in a year, this is called their a. lifetime maximum b. co-payment c. maximum out-of-pocket d. deductible

d. deductible

The cost of a national health insurance program would be____ and the availability of services _______ when supply is more ________. a. less, enhanced, inelastic b. less, diminished, inelastic c. greater, diminished, elastic d. greater, diminished, inelastic

d. greater, diminished, inelastic response feedback: when a supply is more inelastic, a national health insurance plan will only give more power to the provider, which will lead to fewer available services and higher cost

the industry demand curve for physician services a. is more elastic than the demand curve facing the physician-firm b. is more important than the demand curve facing the physician c. has the same elasticity as the demand curve facing the physician-frim d. is less price elastic than the demand curve facing the physician-firm

d. is less price elastic than the demand curve facing the physician-firm

monopolistic competition is described as a. many identical firms and intense price competition b. few identical firms and soft price competition c. many differentiated firms and soft price competition d. many differentiated firms and intense price competition

d. many differentiated firms and intense price competition

which market structure is characterized by a large number of differentiated firms? a. oligopoly b. monopoly c. perfect competition d. monopolistic competition

d. monopolistic competition

the maximum out-of-pocket is the a. percentage of a covered expenses that an individual will have to pay (after the deductible is met.) b. percentage of a covered expense that an insurance company will have to pay (after the deductible is met) c. amount of covered expense that an insurance company will have to pay before the individual pays for anything d. most of covered expense that an individual will have to pay during a year

d. most of covered expense that an individual will have to pay during a year

In the short run, a purely competitive firm will always make an economic profit if: a. p = atc b. p > avc c. p = mc d. p > atc

d. p > atc

An industry comprised of a large number of sellers producing a standardized product is known as: a. monopolistic competition b. oligopoly c. pure monopoly d. pure competition

d. pure competition

People generally buy insurance of any kind because they are a. risk loving b. risk seeking c. risk neutral d. risk averse

d. risk averse

a physician acts as a perfect agent when a. she provides free medical care to poor and uninsured b. she makes the same medical care decisions for a patient as she would make for herself c. she requires patients to make medical choices for themselves d. she makes the same medical care decisions for a patient as a fully informed patient e. she does not injure a patient when providing a treatment

d. she makes the same medical care decisions for a patient as a fully informed patient response feedback: when a physician makes the optimal decision that fully informed patient would make, they are the perfect agent

insurance coverage is sold at a. the pure premium b. the loading fee c. the actuarially fair price d. the actuarially fair price + the loading fee

d. the actuarially fair price + the loading fee