Health Economics Exam II (pt 2)

Product differentiation may stem from which of the following? a. Location b. Quality c. Advertising d. All of the above e. None of the above

d. All of the above

_______ reflect the alternatives given up by using resources to produce medical services. a. Marginal costs b. Fixed costs c. Explicit costs d. Implicit costs e. Variable costs

d. Implicit costs

Consumer-driven healthcare attempts to _______ moral hazard costs by _______ out-of-pocket expenditures faced by consumers. a. increase; decreasing b. decrease; decreasing c. increase; increasing d. decrease; increasing e. None of the above

d. decrease; increasing

An individual who is _______ would be indifferent to purchasing health insurance. a. risk-averse b. self-employed c. unemployed d. risk-neutral e. risk-loving

d. risk-neutral

A decrease in the demand for medical care will cause the real hourly wage of physicians to increase.

False

As consumers purchase more medical care, the marginal utility per dollar spent on medical care increases.

False

Collusion is most likely to occur within monopolistic competition.

False

Estimates of the income elasticity of demand for health insurance have found it to be an inferior good.

False

If a hospital is experiencing diseconomies of scale, it can reduce the average total cost of production by producing a greater quantity of medical services.

False

If the market price is greater than the marginal cost, a profit-maximizing firm will choose to produce less.

False

Since the demand for medical care is derived from the demand for good health, an increase in income will decrease the demand for medical care.

False

A negative income elasticity of demand for out-patient services would imply that it is an inferior good.

True

A risk-averse individual will always prefer a certain amount of income over an expected amount of income of equal value.

True

An increase in consumer income will lead to an increase in the quantity of medical care supplied.

True

Capitation payments made to physician group practices reduce the financial incentive for physicians to provide excessive medical services.

True

Demand for most medical services in the U.S. has been found to be inelastic.

True

Elimination of the tax-exempt status of employer-sponsored health insurance would most likely lead to a decrease in the purchase of health insurance.

True

If a hospital is cost-minimizing, then the marginal productivity per dollar spent on physicians must be equal to the marginal productivity per dollar spent on nurses.

True

If the marginal product is greater than the average product of physicians, then the average product of physicians must be increasing.

True

In the long-run, economic profits will be zero in monopolistic competition.

True

Individuals with higher annual incomes possess a greater incentive to purchase more comprehensive health insurance coverage.

True

Larger deductible requirements decrease the risk of moral hazard.

True

Previously paid sunk costs do not factor into most decisions since they can't be recouped.

True

Short-run average variable costs decrease initially, but then begin to rise due to diminishing marginal productivity of labor.

True

Which of the following might occur after acquiring health insurance due to moral hazard? a. A consumer visits a doctor more frequently. b. A consumer washes his / her hands more frequently. c. A consumer eats healthier. d. All of the above e. None of the above

a. A consumer visits a doctor more frequently.

_______ occur when the cost of producing a medical service decreases as the quantity produced increases. a. Economies of scale b. Economies of scope c. Diseconomies of scale d. Diseconomies of scope e. None of the above

a. Economies of scale

Barriers to entry are not present in which type of industry? a. Perfect Competition b. Monopolistic Competition c. Oligopolies d. Monopolies e. None of the above

a. Perfect Competition

The _______ refers to the impact a lower price for medical care has on the real purchasing power of consumers. a. income effect b. inflation rate c. effective demand d. substitution effect e. nominal demand

a. income effect

If the real hourly wage paid to physicians increase, the real hourly wage paid to nurses will _______. a. increase b. decrease c. stay the same d. increase only if the number of physicians increases e. none of the above

a. increase

Reduced coinsurance rates are likely to _______ moral hazard costs and _______ the risk exposure of the consumer. a. increases; decreases b. decreases; decreases c. increases; increases d. decreases; increases e. None of the above

a. increases; decreases

When the demand for medical care _______, the real hourly wage for physicians should _______. a. increases; increase b. decreases; increase c. increases; stay the same d. increases; decrease e. decreases; stay the same

a. increases; increase

According to John Nyman, classic economic theory overstates the degree of overconsumption of medical services by only considering ______. a. inefficient moral hazard b. pure premiums c. risk-averse consumers d. efficient moral hazard e. income effects

a. inefficient moral hazard

The _______ refers to how much more or less of a product consumers buy when its price changes. a. intensive margin b. extensive margin c. nominal demand d. effective demand e. fuzzy demand

a. intensive margin

The _______ of nurses is represented as the change in medical services provided by an additional unit of nurse-labor. a. marginal product b. marginal cost c. average product d. opportunity cost e. none of the above

a. marginal product

_______ occur when the cost of producing two outputs is less than the sum of the costs incurred when producing each output individually. a. Economies of scale b. Economies of scope c. Diseconomies of scale d. Diseconomies of scope e. None of the above

b. Economies of scope

Assuming that a hospital seeks to minimize total costs, what should it do if the marginal productivity per dollar spent on nurses is less than the marginal productivity per dollar spent on physicians? a. The hospital should utilize more nurses and fewer physicians. b. The hospital should utilize fewer nurses and more physicians. c. The hospital should utilize fewer nurses and fewer physicians. d. The hospital should utilize more nurses and more physicians. e. There is not enough information to determine the appropriate action.

b. The hospital should utilize fewer nurses and more physicians.

An increase in income tax rates _______ the opportunity cost of purchasing employer-sponsored health insurance. a. increases b. decreases c. does not affect d. eliminates e. transfers

b. decreases

Consumer demand for medical care is considered a _______ demand, as it depends on the consumer's demand for good health. a. absolute b. derived c. relative d. supplemental e. supply-side

b. derived

The _______ refers to how many more or fewer people buy a product when its price changes. a. intensive margin b. extensive margin c. nominal demand d. effective demand e. fuzzy demand

b. extensive margin

If a large number of nurses chose to leave the profession in pursuit of alternative careers, what would be the likely impact on the market? a. permanent surplus b. temporary shortage c. temporary surplus d. permanent shortage e. none of the above

b. temporary shortage

If Sarah has an income of $50,000 when healthy, and faces a probability of 0.15 of losing $10,000 of this due to an illness, what is her expected income? a. $17,500 b. $40,000 c. $48,500 d. $44,000 e. $16,000

c. $48,500

Suppose that the inverse market demand for a new vaccine is P = 21,000 - 5Q, and the marginal cost is $10 per vaccine. Assuming that the manufacturer is profit-maximizing, what will be the market price of this new vaccine? a. 15,000 b. 17,250 c. 15,750 d. 14,000 e. 13,500

c. 15,750

According to John Nyman, the reduction in utility due to the payment of an insurance premium when healthy is less than the increase in utility from an equal income transfer when ill. Which of the following best explains why this is true? a. As incomes increase, people gain greater utility from additional income. b. When sick, people no longer behave rationally. c. As incomes decrease, people gain greater utility from additional income. d. When healthy, people are able to get more enjoyment from their income. e. John Nyman is incorrect.

c. As incomes decrease, people gain greater utility from additional income.

Which of the following best explains why production might increase at a decreasing rate with the addition of a variable input? a. Increasing marginal opportunity costs b. Increasing marginal productivity of labor c. Diminishing marginal productivity of labor d. Advancements in technology e. Diminishing marginal opportunity costs

c. Diminishing marginal productivity of labor

Collusion among firms is most likely to take place within which type of industry? a. Perfect Competition b. Monopolistic Competition c. Oligopolies d. Monopolies e. None of the above

c. Oligopolies

When will the marginal utility per dollar spent on medical care equal the marginal utility per dollar spent on entertainment for a consumer? a. This will only occur when the consumer becomes ill. b. This will only occur when the consumer is healthy. c. This will only occur if the consumer seeks to maximize utility. d. This will only occur if the consumer does not enjoy most forms of entertainment. e. This will never occur.

c. This will only occur if the consumer seeks to maximize utility.

The _______ of nurses is represented as the total amount of medical services produced divided by the total amount of nurse-labor. a. marginal product b. marginal cost c. average product d. opportunity cost e. none of the above

c. average product

The net benefit received through the purchase and consumption of medical care is referred to as _______. a. economic surplus b. deadweight loss c. consumer surplus d. producer surplus e. None of the above

c. consumer surplus

If the average product of dental assistants is _______, then the marginal product of that labor must be _______ its average product. a. increasing; less than b. decreasing; equal to c. decreasing; less than d. increasing; equal to e. decreasing; greater than

c. decreasing; less than

Time costs of acquiring medical care are considered _______. a. direct non-medical costs b. direct medical costs c. opportunity costs d. both a and b e. both a and c

c. opportunity costs

If there is an increase in the number of registered nurses and the demand for medical services remains unchanged, what should be expected to happen to the real hourly wage for registered nurses? a. The real hourly wage should increase. b. The real hourly wage should only increase if the demand for medical services is inelastic. c. The real hourly wage should only decrease if the demand for medical services is elastic. d. The real hourly wage should decrease. e. The real hourly wage should only increase if the demand for medical services is elastic.

d. The real hourly wage should decrease.

Insurance _______ the price for medical care, thereby _______ the demand for it. a. increases; decreases b. decreases; decreases c. increases; increases d. decreases; increases e. None of the above

d. decreases; increases

In the short run, if the marginal cost of production is equal to the average total cost of production, then the average total cost is _______. a. less than the average variable cost b. less than the average fixed cost c. maximized d. minimized e. equal to the average variable cost

d. minimized

A _______ attempts to remove financial incentives of physicians to overuse by combining the insurer and provider functions of medical care. a. network model HMO b. PPO c. POS d. staff model HMO e. IPA model HMO

d. staff model HMO

A positive cross-price elasticity estimate between in-patient and out-patient services at a hospital would imply that the two are _______. a. normal goods b. inferior goods c. compliments d. substitutes e. unrelated

d. substitutes

Suppose that the inverse market demand for a new vaccine is P = 21,000 - 5Q, and the marginal cost is $10 per vaccine. Assuming that the manufacturer is profit-maximizing, how many units of this new vaccine will be produced? a. 1,200 b. 750 c. 10,500 d. 1,400 e. 1,050

e. 1,050

Insurance premiums determined by a _______ are based on the risk characteristics of the entire membership. a. loading charge b. experience rating c. staff model d. group model e. community rating

e. community rating

A _______ represents a fixed amount paid by the consumer that is independent of the market price or actual costs of medical care. a. deductible b. loading charge c. coinsurance rate d. claim e. copayment

e. copayment

In the short run, the average fixed cost of production _______ as the quantity of medical services _______. a. decreases; decreases b. increases; increases c. doesn't change; increases d. doesn't change; decreases e. decreases; increases

e. decreases; increases

An individual who is _______ would not choose to purchase health insurance. a. risk-averse b. self-employed c. unemployed d. risk-neutral e. risk-loving

e. risk-loving