Health Economics and Policy, 8th Edition Solution Manual by J
g g g g g g g g g
ames W. Henderson.
g g
1 Opportunitygcostgisgagmeasuregof
a. foregonegopportunities.
b. valuegbasedgongthegalternativegnotgchosen.
c. valuegingtermsgofgthegcostgofgproduction.
d. thegdifferencegbetweengproductiongcostgandgresourcegcost.
e. bothgagandgb.
2. Thegopportunitygcostgofginvestinggingagnewglithotripterg(agmachinegthatgpulverizesgkidneygston
esgwithgsoundgwaves)gis
a. definedgbygthegdollargcostgofgthegequipment.
b. thegsamegforgeveryghealthgcaregprovider.
c. measuredgbygthegdifferencegbetweengthegexpectedgrevenuesgfromgsellinggthegservice
sgofgtheglithotriptergandgtheginvoicegcostgofgthegmachine.
d. definedgbygthegnextgbestgusegofgthegmoneyginvestedgingthegequipment.
e. impossiblegtogcalculate.
3. Theg“invisibleghand”gusinggAdamgSmith’sgterminologygrefersgto
a. governmentgcontrolgofgthegmarket.
b. marketgforcesgworkinggthroughgthegpricegmechanism.
c. thegmoneygsupplygthatgservesgtogkeepgthegeconomygworkinggsmoothly.
d. thegrolegofginnovationgingmaintaininggagsteadygrategofggrowth.
e. “behind-the-
scenes”g policyg makingg tog influenceg howg marketsg allocateg scarcegresources.
4. Accordinggtogrecentgpublicgopiniongpolls,gwhatgpercentagegofgAmericansgaregsatisfiedgwithgth
egqualitygofgthegmedicalgcaregtheygreceive?
a. 15gpercent.
b. 40gpercent.
c. 65gpercent.
d. 70gpercent.
e. 90gpercent.
©g2015gCengagegLearning.gAllgRightsgReserved.gMaygnotgbegcopied,gscanned,gorgduplicated,gingwholegor
ingpart,gexceptgforgusegasgpermittedgingaglicensegdistributedgwithgagcertaingproductgorgservicegorgotherw
isegongagpassword-protectedgwebsitegforgclassroomguse.
,5. Chargingghighergpricesgforgonegcategorygofgpatientsgingordergtogprovidegfreegorgsubsidizedgca
regtoganotherggroupgisgcalled
a. pricegdiscrimination.
b. cost-shifting.
c. categoricalgcosting.
d. reprehensiblegandgunethical.
e. creativegaccounting.
6. AccordinggtogeconomicgtheorygwhatgisgthegoptimalgpercentagegofgGDPgtogbegspentgongmedic
algcare?
a. 6gpercent.
b. 8gpercent.
c. 10gpercent.
d. 12gpercent.
e. Theregisgnogwidely-acceptedgwaygtogdeterminegthegoptimalgpercentage.
7. WhatgphrasegbestgdescribesgmedicalgcaregspendinggingthegUnitedgStatesging1998?
a. Totalgspendinggofgmoregthang$2gtrilliongrepresentsg17gpercentgofgGDPgandgapproximately
$8,000gpergcapita.
b. Totalgspendinggofgmoregthang$1gtrilliongrepresentsg14.8gpercentgofgGDPgandgalmostg$6,00
0gpergcapita.
c. Totalgspendinggofglessgthang$1gtrilliongrepresentsglessgthang13gpercentgofgGDPgandgalmost
$3,000gpergcapita.
d. Totalgspendinggisgrisinggatgdouble-
digitgratesgandgspendinggisgsoaringgtogoverg$5,000gpergcapita.
e. TotalgspendinggisgundergcontrolgandgrepresentsgagshrinkinggpercentagegofgGDP.
8. Theg1974gfederalglegislationgthatgexemptedgemployersgfromgcertaingstateglawsggoverningghealt
hginsurancegwas
a. COBRA
b. ERISA
c. CON
d. HIPAA
e. SCHIP
9. Whichgofgthegfollowinggstatementsgisgbasedgongpositiveganalysis?
a. Individualsg withoutg healthg insuranceg haveg lessg accessg tog physicians’g servicesg tha
ngthosegwhoghaveghealthginsurance.
b. TheghighgcostgofghealthginsurancegplacesgU.S.gfirmsgatgagcompetitivegdisadvantagegwit
hgtheirgforeigngcompetitors.
c. Employersgshouldgbegrequiredgtogprovideghealthginsurancegforgallgfull-
timegworkersgandgtheirgdependents.
d. nonegofgthegabove.
©g2015gCengagegLearning.gAllgRightsgReserved.gMaygnotgbegcopied,gscanned,gorgduplicated,gingwholegor
ingpart,gexceptgforgusegasgpermittedgingaglicensegdistributedgwithgagcertaingproductgorgservicegorgotherw
isegongagpassword-protectedgwebsitegforgclassroomguse.
, e. Bothgagandgb.
10. Economistsgusegthegtermg“marginal”gtogdescribegcostsgandgbenefits
a. thatgaregminimalgandghardlygworthgnoting.
b. thatgaregincrementalgandgthusgrelevantgtogdecisiongmaking.
c. thatgaregnoteworthygbutgnotgthegmostgimportant.
d. whosegimportancegcangbegminimizedgthroughghardgwork.
e. nonegofgthegabove.
11. Selfginsurancegrefersgto:gthegpracticegofgsettinggasidegfundsgtogpaygforgmedicalgcaregexpens
esginsteadgofgpayinggpremiumsgtoganginsurancegcompany.g Approximately,g
ofgallgemployeesgwhogparticipateginggroupginsurancegplansgworkgforgfirmsgthatgself-insure.
a. startinggone’sgownginsurancegcompany
b. buyingginsurancegfromgagnotgforgprofitgentity
c. settinggasidegfundgtogpaygforgmedicalgcaregexpensesginsteadgofgbuyingginsurance
d. nonegofgthese
e. bothgagandgb
12. Whichgofgthegfollowinggisgnotgagcharacteristicgthatgmakesgmedicalgcaregdifferentgfromgother
gcommodities?
a. Demandgforgmedicalgcaregisgirregular.
b. Sellersghavegmoreginformationgthangbuyers.
c. Third-partygpayersgabound.
d. For-profitgprovidersgplaygagmajorgrolegingdeliveringgmedicalgcare.
e. Thegtransactiongitselfgifgfilledgwithguncertainty.
StructuredgDiscussion:
1. Resolved:gThegUnitedgStatesgsystemgofghealthgcaregdeliverygisgingagstategofgcrisis.
2. Resolved:g Theg recentg slowingg ofg healthg careg spendingg asg ag shareg ofg grossg domestic
productgwillgcontinue.g Ingothergwords,gthegrelativegsizegofgtheghealthgcaregsectorghas
greachedgagnaturalglimit.
Appendixg1A:gThegMedicalgCaregPricegIndex
Thisgappendixgdemonstratesgthegusegofgpricegindexesgtogmeasuregpricegchanges.g Cautiongisgadv
isedginginterpretinggchangesgingfixed-
weightgindexes,gsuchgasgthegConsumergPricegIndexg(CPI)gandgthegMedicalgCaregPricegIndexg(MC
PI),gasgagmeasuregofginflation.g ProblemsgingusinggthegMCPI
©g2015gCengagegLearning.gAllgRightsgReserved.gMaygnotgbegcopied,gscanned,gorgduplicated,gingwholegor
ingpart,gexceptgforgusegasgpermittedgingaglicensegdistributedgwithgagcertaingproductgorgservicegorgotherw
isegongagpassword-protectedgwebsitegforgclassroomguse.
, togmeasuregmedicalginflationgaregdiscussed,gincludinggwhatgtogmeasure,ghowgtogaccountgforgquali
tygimprovements,gandghowgtogincorporategnewgproductsgintogthegindex.
AppendixgObjectives
1. Summarizegthegissuesginvolvedgingmeasuringgpricegchangesgwithgpricegindexes.
2. Describegthegusegofgthegmedicalgcaregpricegindexgingmeasuringgchangesgingmedicalgcar
egprices.
3. Specifygalternativesgforgmeasuringgpricegchanges.
AppendixgOutline
a. Measuringgpricegchangesgwithgindexgnumbers
b. Medicalgcaregpricegindex
c. Problemsgwithgusinggagfixed-weightgindexgasgagmeasuregofginflation
d. Measuringginputsginsteadgofgoutcomes
e. Measuringgqualitygchanges
f. Accountinggforgnewgproducts
g. Othergproblems
h. Alternativegmethodsgtogmeasuregmedicalgcareginflation
i. Summarygandgconclusions
Chapter 2: Using Economics to Study Health Care Issues
g g g g g g g g
Thisgchaptergintroducesgthegbasicgeconomicsgmodelgofgsupplygandgdemandgandgexaminesgitsgus
egingthegstudygofghealthgcaregissues.g Agdiscussiongofgthegprinciplesgofgoptimizinggbehaviorgsetsgt
hegstagegforgthegdevelopmentgofgthegmodelgofgdemandgandgsupply.g Agdiscussiongofgthegtheoryg
ofgthegfirmgfollows,gcontrastinggperfectgandgimperfectgcompetition.g Supply-gandgdemand-
sidegimperfectionsgaregalsogdiscussed.
ChaptergOutline
a. Thegrelevancegofgeconomicsginghealthgcare
©g2015gCengagegLearning.gAllgRightsgReserved.gMaygnotgbegcopied,gscanned,gorgduplicated,gingwholegor
ingpart,gexceptgforgusegasgpermittedgingaglicensegdistributedgwithgagcertaingproductgorgservicegorgotherw
isegongagpassword-protectedgwebsitegforgclassroomguse.
g g g g g g g g g
ames W. Henderson.
g g
1 Opportunitygcostgisgagmeasuregof
a. foregonegopportunities.
b. valuegbasedgongthegalternativegnotgchosen.
c. valuegingtermsgofgthegcostgofgproduction.
d. thegdifferencegbetweengproductiongcostgandgresourcegcost.
e. bothgagandgb.
2. Thegopportunitygcostgofginvestinggingagnewglithotripterg(agmachinegthatgpulverizesgkidneygston
esgwithgsoundgwaves)gis
a. definedgbygthegdollargcostgofgthegequipment.
b. thegsamegforgeveryghealthgcaregprovider.
c. measuredgbygthegdifferencegbetweengthegexpectedgrevenuesgfromgsellinggthegservice
sgofgtheglithotriptergandgtheginvoicegcostgofgthegmachine.
d. definedgbygthegnextgbestgusegofgthegmoneyginvestedgingthegequipment.
e. impossiblegtogcalculate.
3. Theg“invisibleghand”gusinggAdamgSmith’sgterminologygrefersgto
a. governmentgcontrolgofgthegmarket.
b. marketgforcesgworkinggthroughgthegpricegmechanism.
c. thegmoneygsupplygthatgservesgtogkeepgthegeconomygworkinggsmoothly.
d. thegrolegofginnovationgingmaintaininggagsteadygrategofggrowth.
e. “behind-the-
scenes”g policyg makingg tog influenceg howg marketsg allocateg scarcegresources.
4. Accordinggtogrecentgpublicgopiniongpolls,gwhatgpercentagegofgAmericansgaregsatisfiedgwithgth
egqualitygofgthegmedicalgcaregtheygreceive?
a. 15gpercent.
b. 40gpercent.
c. 65gpercent.
d. 70gpercent.
e. 90gpercent.
©g2015gCengagegLearning.gAllgRightsgReserved.gMaygnotgbegcopied,gscanned,gorgduplicated,gingwholegor
ingpart,gexceptgforgusegasgpermittedgingaglicensegdistributedgwithgagcertaingproductgorgservicegorgotherw
isegongagpassword-protectedgwebsitegforgclassroomguse.
,5. Chargingghighergpricesgforgonegcategorygofgpatientsgingordergtogprovidegfreegorgsubsidizedgca
regtoganotherggroupgisgcalled
a. pricegdiscrimination.
b. cost-shifting.
c. categoricalgcosting.
d. reprehensiblegandgunethical.
e. creativegaccounting.
6. AccordinggtogeconomicgtheorygwhatgisgthegoptimalgpercentagegofgGDPgtogbegspentgongmedic
algcare?
a. 6gpercent.
b. 8gpercent.
c. 10gpercent.
d. 12gpercent.
e. Theregisgnogwidely-acceptedgwaygtogdeterminegthegoptimalgpercentage.
7. WhatgphrasegbestgdescribesgmedicalgcaregspendinggingthegUnitedgStatesging1998?
a. Totalgspendinggofgmoregthang$2gtrilliongrepresentsg17gpercentgofgGDPgandgapproximately
$8,000gpergcapita.
b. Totalgspendinggofgmoregthang$1gtrilliongrepresentsg14.8gpercentgofgGDPgandgalmostg$6,00
0gpergcapita.
c. Totalgspendinggofglessgthang$1gtrilliongrepresentsglessgthang13gpercentgofgGDPgandgalmost
$3,000gpergcapita.
d. Totalgspendinggisgrisinggatgdouble-
digitgratesgandgspendinggisgsoaringgtogoverg$5,000gpergcapita.
e. TotalgspendinggisgundergcontrolgandgrepresentsgagshrinkinggpercentagegofgGDP.
8. Theg1974gfederalglegislationgthatgexemptedgemployersgfromgcertaingstateglawsggoverningghealt
hginsurancegwas
a. COBRA
b. ERISA
c. CON
d. HIPAA
e. SCHIP
9. Whichgofgthegfollowinggstatementsgisgbasedgongpositiveganalysis?
a. Individualsg withoutg healthg insuranceg haveg lessg accessg tog physicians’g servicesg tha
ngthosegwhoghaveghealthginsurance.
b. TheghighgcostgofghealthginsurancegplacesgU.S.gfirmsgatgagcompetitivegdisadvantagegwit
hgtheirgforeigngcompetitors.
c. Employersgshouldgbegrequiredgtogprovideghealthginsurancegforgallgfull-
timegworkersgandgtheirgdependents.
d. nonegofgthegabove.
©g2015gCengagegLearning.gAllgRightsgReserved.gMaygnotgbegcopied,gscanned,gorgduplicated,gingwholegor
ingpart,gexceptgforgusegasgpermittedgingaglicensegdistributedgwithgagcertaingproductgorgservicegorgotherw
isegongagpassword-protectedgwebsitegforgclassroomguse.
, e. Bothgagandgb.
10. Economistsgusegthegtermg“marginal”gtogdescribegcostsgandgbenefits
a. thatgaregminimalgandghardlygworthgnoting.
b. thatgaregincrementalgandgthusgrelevantgtogdecisiongmaking.
c. thatgaregnoteworthygbutgnotgthegmostgimportant.
d. whosegimportancegcangbegminimizedgthroughghardgwork.
e. nonegofgthegabove.
11. Selfginsurancegrefersgto:gthegpracticegofgsettinggasidegfundsgtogpaygforgmedicalgcaregexpens
esginsteadgofgpayinggpremiumsgtoganginsurancegcompany.g Approximately,g
ofgallgemployeesgwhogparticipateginggroupginsurancegplansgworkgforgfirmsgthatgself-insure.
a. startinggone’sgownginsurancegcompany
b. buyingginsurancegfromgagnotgforgprofitgentity
c. settinggasidegfundgtogpaygforgmedicalgcaregexpensesginsteadgofgbuyingginsurance
d. nonegofgthese
e. bothgagandgb
12. Whichgofgthegfollowinggisgnotgagcharacteristicgthatgmakesgmedicalgcaregdifferentgfromgother
gcommodities?
a. Demandgforgmedicalgcaregisgirregular.
b. Sellersghavegmoreginformationgthangbuyers.
c. Third-partygpayersgabound.
d. For-profitgprovidersgplaygagmajorgrolegingdeliveringgmedicalgcare.
e. Thegtransactiongitselfgifgfilledgwithguncertainty.
StructuredgDiscussion:
1. Resolved:gThegUnitedgStatesgsystemgofghealthgcaregdeliverygisgingagstategofgcrisis.
2. Resolved:g Theg recentg slowingg ofg healthg careg spendingg asg ag shareg ofg grossg domestic
productgwillgcontinue.g Ingothergwords,gthegrelativegsizegofgtheghealthgcaregsectorghas
greachedgagnaturalglimit.
Appendixg1A:gThegMedicalgCaregPricegIndex
Thisgappendixgdemonstratesgthegusegofgpricegindexesgtogmeasuregpricegchanges.g Cautiongisgadv
isedginginterpretinggchangesgingfixed-
weightgindexes,gsuchgasgthegConsumergPricegIndexg(CPI)gandgthegMedicalgCaregPricegIndexg(MC
PI),gasgagmeasuregofginflation.g ProblemsgingusinggthegMCPI
©g2015gCengagegLearning.gAllgRightsgReserved.gMaygnotgbegcopied,gscanned,gorgduplicated,gingwholegor
ingpart,gexceptgforgusegasgpermittedgingaglicensegdistributedgwithgagcertaingproductgorgservicegorgotherw
isegongagpassword-protectedgwebsitegforgclassroomguse.
, togmeasuregmedicalginflationgaregdiscussed,gincludinggwhatgtogmeasure,ghowgtogaccountgforgquali
tygimprovements,gandghowgtogincorporategnewgproductsgintogthegindex.
AppendixgObjectives
1. Summarizegthegissuesginvolvedgingmeasuringgpricegchangesgwithgpricegindexes.
2. Describegthegusegofgthegmedicalgcaregpricegindexgingmeasuringgchangesgingmedicalgcar
egprices.
3. Specifygalternativesgforgmeasuringgpricegchanges.
AppendixgOutline
a. Measuringgpricegchangesgwithgindexgnumbers
b. Medicalgcaregpricegindex
c. Problemsgwithgusinggagfixed-weightgindexgasgagmeasuregofginflation
d. Measuringginputsginsteadgofgoutcomes
e. Measuringgqualitygchanges
f. Accountinggforgnewgproducts
g. Othergproblems
h. Alternativegmethodsgtogmeasuregmedicalgcareginflation
i. Summarygandgconclusions
Chapter 2: Using Economics to Study Health Care Issues
g g g g g g g g
Thisgchaptergintroducesgthegbasicgeconomicsgmodelgofgsupplygandgdemandgandgexaminesgitsgus
egingthegstudygofghealthgcaregissues.g Agdiscussiongofgthegprinciplesgofgoptimizinggbehaviorgsetsgt
hegstagegforgthegdevelopmentgofgthegmodelgofgdemandgandgsupply.g Agdiscussiongofgthegtheoryg
ofgthegfirmgfollows,gcontrastinggperfectgandgimperfectgcompetition.g Supply-gandgdemand-
sidegimperfectionsgaregalsogdiscussed.
ChaptergOutline
a. Thegrelevancegofgeconomicsginghealthgcare
©g2015gCengagegLearning.gAllgRightsgReserved.gMaygnotgbegcopied,gscanned,gorgduplicated,gingwholegor
ingpart,gexceptgforgusegasgpermittedgingaglicensegdistributedgwithgagcertaingproductgorgservicegorgotherw
isegongagpassword-protectedgwebsitegforgclassroomguse.
