Final Exam

Which of the factors below was listed by both the author and myself as a contributor to turmoil in the US healthcare system?

Technological turbulence

Which of the following statements best describes the relationship between technology and costs?

Technology often replaces labor so fixed costs go up while variable costs will often go down (for the same level of output)

Which point from the lecture best explains the importance of learning the economics of healthcare?

The HC system is undergoing a tremendous amount of change in technologies, market structure, and the regulatory environment

This chapter's title is "Maximizing Profits". Which of the following defines profits?

Total revenue minus total cost

The first concerted efforts to require that medical practitioners in the United States be licensed dates to just after the Civil War. Which billing system currently used today was the most widely used at that time?

Fee for service reimbursement

Which of the quiz resource sheet figures depicts the relationship between costs, quantity, and prices in a COMPETITIVE market?

Figure A

Which of the following most directly decreases profits if nothing else changes?

Giving your workforce a raise

Chapter 6 discussed mechanisms for reducing costs. Which mechanism can we expect to affect costs when patients are enrolled in an HMO compared to a traditional fee-for-service plan?

HMOs reduce the incentive to offer more treatments

Which of the following factors is more likely to IMPROVE the accuracy of a forecast?

Having fewer factors felt to influence the event being forecast

Which of the following is NOT an advantage to physicians of being employees of a health maintenance organization (HMO) compared to being an independent practitioner and practice owner billing under a fee for service basis?

Higher income

Which of the following items was NOT a contributing factor to the desirability and availability of health insurance?

Implementation of Social Security

If you get a raise and go out and buy a new car which concept from the chapter does your action most closely align with?

Income elasticity of demand

[Refer to Figure A] Which of the following changes in the depicted firm's output illustrates economies of scale?

Increasing output from Q2 to Q4

[Drug Price Article] The article indicated that some of the drugs in question were lifesaving or had important positive impacts on patients' lives. What concept from the current chapter corresponds to these descriptions?

Inelastic demand

Previous chapters have emphasized the high level of overall spending on healthcare in the United States. Which of the following is NOT a contributing factor to overall aggregate spending levels in the US?

Introduction of health maintenance organizations (HMO)

[Figure B] If P is the price of a primary care doctor's visit and the demand for these visits is as shown in the diagram what is the total revenue to providers for all visits if there is no insurance?

P x E

Consider a typical scenario where an insurer splits costs of treatment between providers and the insured by means of a copay for each treatment. Assume for this insurer that copays are a flat fee such as $10 for a primary care visit and $20 for a specialist visit. (Disregard the role of deductibles for this question.) If the insurer is able to negotiate lower fees from providers what change in patient/consumer behavior are we likely to see?

Patients do not have any incentive to change consumption

A hospital is thinking of spending $125,000 to implement a system where doctors in private practice conducting rounds in the hospital can connect to their own electronic health records for the admitted patients (if the doctors' EHR systems are compliant with industry standards). Which of the following is an opportunity cost of making this investment?

Revenue that might be realized from using the money to expand the outpatient surgery center the hospital owns

[Figure B] P is the price of a primary care doctor's visit and the demand for these visits is shown in the diagram. If patients have insurance with a copay per visit of F how will revenue to providers change if the insurance company raises the copay per visit from $F to $R?

Revenue will decline by P x (W - J)

I live in Brevard County and every winter the roads are filled with license plates from places like Ontario, Michigan, New York, and other northern locations as the snowbirds, mostly elderly retirees, flee harsh winters for milder Florida climates. If you manage a medical clinic that caters to walk-in patients which of the techniques listed below is best suited to include in your forecast method to predict demand for your services?

Seasonality

Which of the following assumptions of perfectly competitive markets is violated when a physician agrees to treat charity patients at a free clinic during their vacation?

Selfish motivation

[Figure D] Assume that initially all firms in the industry have the same cost structure shown on the right side of the figure for the Higher Cost Firm and that the industry price is at CB (low point on the high cost ATC curve). If the firm on the left hires you, and you are able to marry your genius with your knowledge of healthcare economics to lower the firms costs of operations as shown, which of the following options makes the most sense for your efficiently run firm?

Sell at the same price but make higher profits

[Figure A] Which of the following statements could be true if the price of the depicted product changes from $2.30 to $2.35?

Some buyers might still buy the product but might buy less than they did at the lower price

The author tells us that decisions should be made "at the margin" instead of using averages. Which rule should be used to determine the optimal level of product to produce in a MONOPOLISTIC (single seller) industry?

Set the quantity of production where marginal revenue equals marginal cost

[Figure B] Which drawing most likely indicates the greatest revenue GAIN if price is DECREASED?

drawing 1

Which of the following types of cost is determined by small changes in the quantity of goods or services a company produces?

marginal cost

Individuals make decisions about their own consumption of products and services. Which feature of the US healthcare system (and actually that of most other developed countries) differs from spending on most consumer goods and services and was identified as having a major impact on overall healthcare spending?

The dispersion of healthcare payment responsibilities between patients, insurers, and governments

[Figure B] What are the depicted firm's total profits at an output level of 3,000?

-450,00

Why are courses and even majors offered in specialized areas of Economics such as Healthcare Economics?

Specialized fields such as healthcare have distinct characteristics which create different behaviors and structures compared to 'standard' competitive markets.

A medical clinic wants to schedule appointments to make the best use of the providers' time, see the most patients possible, and minimize patient wait times. Key to successful scheduling is understanding how long patients are likely to spend with the provider during an appointment. If the clinic has been in business a long time and has good appointment records which kind of risk or uncertainty does the clinic face?

Statistical evidence for probabilities of outcomes

Which of the following statements best describes the role of statistical analysis in forecasting?

Statistics lets us forecast a difficult to observe factor based on its relationship to a more directly observable factor

Consider a small dental practice. Which of the following is NOT an example of a fixed cost?

Supplies used to treat patients

Which of the following factors would not have influenced a student's evaluation of the future demand for health services administration majors?

The difficulty of certain courses such as Healthcare Economics

[Refer to the Influence Diagram] What does this model indicate about the role played by a storm forecast?

The forecast is the only direct influence on individuals' evacuation decisions

We all know that Florida is an attractive place to live for healthcare economics professors and other old people, especially retirees. Florida's economy had a second order effect following the 2008 financial crisis, including the housing market crash, that interrupted the migration of retirees to Florida. Which of the following qualifies as a second order effect that had this impact?

The housing market crash prevented retirees from selling their current homes in order to move.

Which of the following decision right is most directly affected when the government imposes a sales tax on products a supplier sells?

The price consumers will pay for each item they buy

Which of the products below will have the most ELASTIC demand? (Consider the overall demand for the product, not the demand for a single firm's product.)

steak

[Figure B] Which drawing illustrates an elastic demand curve?

Drawing 1

Which of the following does not meet our definition of a model?

-A road map -A company's income statement from the Accounting Department -A simulation of patient arrivals to an emergency department

[Refer to the Office Expansion Problem scenario and diagram] What is the value that belongs at the end of the middle 'branch' of the lower structure of the tree, where the triangle-label "F" appears? Type in your answer as an integer number with no other characters (such as $ or commas).

0

Why should economists and managers care about elasticity?

Elasticity tells us about how changes in price can be expected to change revenue

[Figure D] What is the change in revenue for a price change from $2.10 to 2.40? Be sure to use the correct figure and pay attention to plus and minus symbols in the answers.

-$2,400

[Figure D] What is the elasticity for a price change from $2.10 to 2.25? Be sure to use the correct figure.

-2.14

[Figure C] If the price of the indicated product is $50 what is the TOTAL REVENUE received by sellers?

100.00

[Figure A] If each firm has the same cost structure how many firms will this industry support?

25

[Refer to the Office Expansion Problem scenario and diagram] What is the expected value of the decision to rent the middle-sized office suite (the value we would annotate where the triangle-label "C" appears)? Type in your answer as a number with up to one decimal place if needed and no other characters (such as $ or commas).

3

[Figure A] If the price of the indicated product is 2.40 what is the TOTAL SPENDING by buyers?

48.00

[Figure A] If the price of the indicated product is 2.20 what is the TOTAL REVENUE received by sellers?

88.00

Which of the following best represents a major theme, one of the most commonly mentioned ideas, from MY coverage of Chapter 1 and the introduction to healthcare economics?

A fundamental task of managers in any profession is decision making

One goal of the Triple Aim is to improve population health. Which statement below best reflects a relationship between this goal and other goals of the Triple Aim?

A healthier population most directly reduces the quantity of acute care needed

Which of the following has the greatest potential to be an instance of supplier induced demand?

A psychologist recommends a course of ten more counseling sessions to a patient

Why do we care about analyzing workflow as part of a cost savings program?

All of an organization's variable costs are the sum of the costs of performing detailed tasks in the workflow

What did the Frank Knight quote from Module 1, my course introduction in the syllabus, and the Donald Rumsfeld quote in the current module's power point slides have in common?

All three address the presence of risk or uncertainty

A shift in demand is defined as a change in the quantity demanded at any price. Which of the following situations best exemplifies a shift in demand?

An advertising campaign increases public awareness of a new product

Which of the following statements best describes the relationship between efficiency goals and managing costs?

As we become more efficient the cost per unit of output goes down

The "baby boom" was a spike in the US birth rate between 1946 and 1964 as hundreds of thousands of American men returned from World War II and hundreds of thousands of couples got busy catching up with their lives. The baby boom was followed by a sharp decline in birth rates. Today these "boomers" are between 54 and 72. Which of the products or services below would most likely include the demographic data on the baby boom in a forecast of future demand?

Assisted living facilities

[Figure A] If the demand curve shown is for total market demand what does Point V on the graph indicate?

At a price of $2.30 the market will consume 30 units of the product

Which of the following statements is the most consistent with the direction of the demand curve?

At high prices consumers are less willing to spend higher proportions of their incomes on a product if they need the money for other purposes.

Which of the following types of cost is dependent on the quantity of goods or services a company produces?

Average cost

Which of the following techniques would be the most useful to a grocery store in predicting the demand for bread tomorrow?

Averaging daily sales for the last three weeks and using that value

[Figure C] Which of the statements below best describes the situation at Point H on the diagram?

Buyers and sellers are equally willing to trade the same quantity at the same price

[Figure D, Left Side] If the indicated cost curves are for a single firm what is the lowest price the firm would ever be willing to sell its product for?

CB

President Trump has announced the intent of creating a Space Force as a sixth branch of the US armed forces. Literally the morning I am writing this question the Brevard County newspaper has speculated that, since the other services have military academies (colleges) for future officers the Space Force should have one as well and that Brevard County, where the Space Center is located, would be an ideal location for such an institution. Should such an institution be built which of the following would you expect to be the LEAST affected by this change?

Demand for healthcare providers who accept Medicaid

Which of the following is NOT an advantage of modeling?

Determining the variance or standard deviation of a set of data

Which of the following is the best example of positive economic analysis?

Determining whether changes in the Medicaid reimbursement rate for medical procedures affects how many providers accept Medicaid insurance.

Figure E shows possible supply and demand curves in the market for flu vaccine. Assume the market is initially in equilibrium at Point A. What equilibrium points would be reached as the market responds to these two events. The events are specified in the order in which they occur and the possible equilibrium sequences are in order also. i. Multiple newspapers and broadcasters report that the vaccine is not particularly effective against the current year's flu strain ii. As the flu season gets underway multiple deaths are occurring and doctors announce that the vaccine offers some protection and that everyone should get the vaccine.

K — A

Researchers have found that of medications that make it as far as Phase I trials only about 21.5% of them are eventually approved for marketing. We also know that the major drug companies are routinely working on multiple development projects at any one time. What concept from this module most closely aligns with this behavior?

Managing risk

The text discusses incentives and obtaining buy-in from employees or 'agents'. Which of the options below best explains how this topic is tied to the main idea of maximizing profits in this chapter?

Many cost savings steps require that employee work conditions be changed

Which of the statements below best describes the relationship between forecasting and models such as decision trees and influence diagrams?

Modeling helps us to identify what missing information we have might need to be predicted or forecast.

Which of the following factors requires that some form of forecasting take place?

Most business decisions are made in advance of the realization of the outcome of the decision.

Which of the following situations most dramatically distinguishes the behavior of not for profit (NFP) organizations from that of for profit organizations?

NFP organizations must evaluate progress toward goals other than profit in their decision making

Economics teaches us that people are willing to pay more for what they value more. What changes in the healthcare environment lead to a situation which supported higher fees for medical treatment?

New knowledge and science increased the effectiveness of care and its potential to improve lives

A self-employed massage therapist has no fixed place of business but instead travels in her own car to client locations with a portable massage table to provide services. The therapist provides her own massage oils and candles which are used in most treatment sessions. If the therapist's car and table have been paid for which cost pattern from the list below most closely matches her cost structure?

No fixed costs and nothing but variable costs

[Refer to the Office Expansion Problem scenario and diagram] Which of the following is true about the circle with the 2 in it (next to the triangle labeled C)?

Node 2 and the structure to the right indicates that three possible levels of customer demand can be realized after the practice decides to rent the middle-sized offices

Figure B shows possible supply and demand curves in the market for registered nurses. Assume the market is initially in equilibrium at Point A. What equilibrium points would be reached as the market responds to these three events. The events are specified in the order in which they occur and the possible equilibrium sequences are in order also. i. State regulators change the RN minimum education requirements for licensure as an RN from an associate's degree to a 4-year degree ii. Small physician practices are allowed to use less expensive certified nursing assistants instead of registered nurses for patient intake in their offices iii. Healthcare industry lobbyists slip a provision into an immigration reform bill allowing large numbers of foreign trained nurses to come to the US on a professional visa

Points G - F - K

Figure B shows possible supply and demand curves in the market for registered nurses. Assume the market is initially in equilibrium at Point A. What equilibrium points would be reached as the market responds to these three events. The events are specified in the order in which they occur and the possible equilibrium sequences are in order also. i. State regulators increase the number of patients a hospital-based nurse can cover during a shift ii. Healthcare industry lobbyists slip a provision into an immigration reform bill allowing large numbers of foreign trained nurses to come to the US on a professional visa iii. Large numbers of nurses become disgusted with nursing and leave the profession to study healthcare economics

Points K - B - K

[Refer to Figure A] Which quantity of production shown on the graph has the lowest average variable cost (AVC)?

Q3

Which of the following is an example of a situation in which a firm is realizing economies of scale?

Two formerly independent hospitals merge into a single company and 1/3 of the information technology staff can be laid off.

Which forecasting technique gives the forecaster the most factors to experiment with in trying to create the most accurate forecast?

Weighted moving average

Consider a patient visit to a primary care physician for a routine physical exam. Which of the following is NOT a decision right of the INSURER?

Whether the doctor will accept the insurance plan

Consider a patient taking a prescription medication which has just been removed from their insurers formulary (the insurer has quit covering this medication). However the insurer covers a different medication targeted at the same condition. Which of the following is NOT a decision right of the PATIENT?

To require the insurer to continue covering the original medication

Consider a medical practice that has a list or standard price of $150 for performing a routine annual check up for a well patient. The practice is an authorized provider in the PPO networks of two large health insurers and each insurer has the following terms in effect when one of the insurers' subscribed insureds receives this exam from the practice: 1) The total fee for the exam will be $100; 2) Insured patients will pay $10 for the exam and the insurer will pay the rest. Patients not covered by one of these two insurers pay full list price for the exam. What is the cost of this exam from the perspective of AN UNINSURED PATIENT? Enter your answer as an integer with no dollar signs, decimal points (periods), or units to the right of the decimal place

$150

Consider a medical practice that has a list or standard price of $150 for performing a routine annual check up for a well patient. The practice is an authorized provider in the PPO networks of two large health insurers and each insurer has the following terms in effect when one of the insurers' subscribed insureds receives this exam from the practice: 1) The total fee for the exam will be $100; 2) Insured patients will pay $10 for the exam and the insurer will pay the rest. Patients not covered by one of these two insurers pay full list price for the exam. What is the cost of this exam from the perspective of THE INSURANCE COMPANY when the service is provided to one of their subscribed clients? Enter your answer as an integer with no dollar signs, decimal points (periods), or units to the right of the decimal place.

$90

Which level or levels of economic activity is the target of economic study and research?

Economics can be applied at the individual or household, firm, industry, or national levels

What do you think I WOULD SAY is the best reason for studying economics?

Economics explains the structure of the companies, industries, and institutions in which we expect to work.

[Drug Price Article] The article stated that 19% of people on prescription drugs have skipped taking a drug or reduced the dosage (by cutting dosage in half) to reduce the cost. What concept from the current chapter corresponds to this description for these individuals?

Elastic demand

The author wrote that, "Human wants are infinite, or nearly so." What conclusion can we reach about economic systems from the parallel observation that resources are not infinite?

Some mechanism must exist to allocate products among those who desire them when there is insufficient supply to satisfy all wants.

Figure E shows possible supply and demand curves in the market for registered nurses. Assume the market is initially in equilibrium at Point A. What equilibrium points would be reached as the market responds to these three events. The events are specified in the order in which they occur and the possible equilibrium sequences are in order also. i. State regulators increase the number of patients a hospital-based nurse can cover during a shift ii. Healthcare industry lobbyists slip a provision into an immigration reform bill allowing large numbers of foreign trained nurses to come to the US on a professional visa iii. Large numbers of nurses become disgusted with nursing and leave the profession to study healthcare economics

Points K - B - K

In an unregulated (free) market how is the decision about allocating scarce goods to those who desire them made?

Prices increase until only those who value the product as much as it costs will buy it

[Figure A] Which of the following descriptions is consistent with initial position of the market at Point B followed by movement to equilibrium at Point E?

Producers are initially producing a high quantity and charging a high price but are not able to sell all of their inventory because not enough buyers will pay that much. Producers reduce production and price and buyers are willing to purchase larger quantities at the lower prices.

[Textbook: Missouri Reading] This reading indicated that several insurers have launched narrow network plans with limited covered providers but the insurers select "hospitals and physicians who have demonstrated high quality with low costs." Which of the avenues for improvement we have covered so far are the most directly addressed by this approach?

Providers improve patient experience (outcomes) AND lower cost per person of care

Which element of the Triple Aim will have the most direct impact on overall healthcare costs?

Reduce healthcare costs per person

Which of the problems with fee for service payment plans does the preferred provider organization (PPO) most directly seek to overcome?

Reduces total costs by reducing the cost per episode of care

Which of the following is NOT a benefit to EMPLOYERS of offering employer based health insurance?

Reducing costs

[Textbook: New Jersey Reading] This reading indicated that as part of New Jersey's Medicaid expansion program there will be some new limitations on benefits for some of the newly eligible Medicaid enrollees. Which of the avenues for reducing costs we have covered so far is the most directly addressed by this improvement?

Reducing the quantity of care being paid for

Consider an outpatient surgery center. Which of the following is NOT an example of a variable cost?

Rent for the facility's office spaces

Which of the following is the best example of a normative economic decision?

Repealing the individual mandate in the Affordable Care Act, which required that individuals who did not receive health insurance from other sources must purchase it themselves

[Refer to the Practice Hiring/Selling Problem scenario and diagram] Which option gives the best outcome using the highest weighted value decision rule?

Sell to Big Med and work as employees

[Figure A] If producers make and offer quantity Q3 for sale which of the following statements is NOT correct?

Sellers can sell the entire amount they produce at a price of P3 per unit

Which of the following statements is the most consistent with the direction of the supply curve?

The upward slope of the marginal cost curve which is derived from the firm's overall costs determines individual seller supply curves