Getzen’s Health Economics and Financing, Sixth Edition Test Bank
File: c01; Chapter 1 Choices: Money, Medicine, and Health
True/False
1) While the concept of value as related to health care has been discussed extensively, there is
still no way to compare health outcomes achieved to health care dollars spent.
Answer: False.
Reference: 1.1 What is Economics/Value in Health Care
Level: Easy
2) Recovering the investment is often cited by drug manufacturers as justification for the
extremely high prices that are charged for new medications.
Answer: True.
Reference: 1.1 What is Economics?/Value in Health Care
Level: Easy
3) Ranking everyone by the amount spent on medical care, most health care expenditures are
accounted for by a small percentage of people. . This phenomenon is called cost shifting.
Answer: False.
Response: The statement is correct; the explanation is incorrect. The situation describes only
the fact that medical expenses are incurred unevenly across all of the population, and does not
specify who pays the majority of the nation’s healthcare bill. The term cost shifting, however,
incorporates the comparison of who incurred the expenses versus who paid the bill.
Reference: 1.1 What Is Economics?/Financing Health Care AND 1.2 Flow of Funds/Health Care
Spending in the United States Level: Medium
4) Not only is the share of the GDP going to health care higher in 2020 than in 1929, the wages
of health care workers have risen more rapidly than for other types of labor.
Answer: True.
Reference: 1.2 Flow of Funds/ Health Care Providers: The Uses of Funds.
Level: Easy
Chapter 1 Copyright © 2022
1
,Getzen’s Health Economics and Financing, Sixth Edition Test Bank
5) The Flow of Funds idea emphasizes that total dollars spent by individuals, government and
other third party payers for health care must equal total income earned by health care providers,
administrators and other health care workers.
Answer: True.
Reference: 1.2 Flow of Funds.
Level: Easy
6) The hospital opens a cancer center in an adjacent abandoned building. Since it was an
abandoned building, there are no opportunity costs of this decision.
Answer: False.
Response: The building, as well as all other resources that were invested into the cancer center,
could have been used in an alternate way; to open a women’s health center, for instance. The
foregone benefits from opening a women’s health center would be the opportunity cost of this
decision.
Reference: 1.3 Economics Principles as Conceptual Tools/Opportunity Cost
Level: Medium
7) Socioeconomic differences in mortality found in the U.S. are most likely attributable to lack
of universal health insurance coverage.
Answer: False.
Response: Socioeconomic differences in mortality are noticed in other OECD countries as well
as in poorer countries like Ghana and Bangladesh.
Reference: 1.4 Health Disparities.
Level: Medium
8) When a drug company advertises it will provide a prescription drug at no charge to certain
individuals who cannot afford a doctor prescribed drug, costs are most likely being shifted away
from individuals who are paying high prices to those who are paying nothing.
Answer: False.
Response: Costs are being shifted to individuals who are paying high prices from those who are
paying nothing.
Reference: 1.1 What Is Economics?/Financing Health Care.
Level: Easy
Chapter 1 Copyright © 2022
2
,Getzen’s Health Economics and Financing, Sixth Edition Test Bank
9) A hospital system is rewarded with higher profits in the short term when it implements
electronic health records which increase the timeliness of physician and patient communication.
Answer: False.
Response: While it is possible that a hospital might realize higher patient revenues in the long
term if it increases its quality of service in the area of communication, it is unlikely that an
investment in electronic health records would result in a short term return. Further, the idea of a
hospital realizing a “profit” is questionable. Most hospitals are “not for profit” institutions,
which brings into question the maximizing goal of the hospital. This highlights the difference
between hospitals and the neoclassical profit-maximizing firms.
Reference: 1.1 What Is Economics?/Financing Health Care.
Level: Medium
10) As access to high-quality care has been steadily improving across the world, inequalities in
health can still be found only in relatively poor countries.
Answer: False.
Reference: 1.4 Health Disparities
Level: Easy
Chapter 1 Copyright © 2022
3
, Getzen’s Health Economics and Financing, Sixth Edition Test Bank
Multiple Choice
11) In which of the following examples does the fundamental theorem of exchange not apply?
a) You pay your optometrist $500 for a new pair of eyeglasses.
b) You donate your old, used eyeglasses to the Lions Club, a charitable organization which
recycles and distributes the glasses to needy people.
c) You pay a fertility specialist $10,000 to perform In Vitro Fertilization procedure which does
not result in pregnancy.
d) You pay a fertility specialist $10,000 to perform In Vitro Fertilization procedure which
results in pregnancy.
e) Unknown to you, your neighbor is tapping into your cable TV service and sharing your
service.
Answer: e
Response: The fundamental theorem of exchange rests on the idea that both parties engage in a
transaction because they expect to be made better off by entering it. In case (e), one neighbor is
stealing service that the other neighbor has not agreed to provide.
Reference: 1.1. What is Economics?
Level: Medium
12) To reduce the ache in your knees when you work out, you buy an elastic knee brace from
the pharmacy section at the grocery store. This transaction differs from paying a surgeon to
replace your knee joint because
a) the price of the knee brace is the same at all the local markets; however, the price for a knee
replacement cannot be determined.
b) the knee brace is basically the same product regardless of where you buy it or who you buy it
for, even though there may be different manufacturer brand names. However, each knee
replacement surgery is different, and its specifics vary according to the individual patient’s needs
and the individual physicians’ assessment and skills.
c) you are able to pay for the purchase of the knee brace from your health savings account.
d) you require a physician’s expertise to determine your need for the knee brace.
e) you expect that the transaction will result in alleviating your pain.
Answer: b
Response: Answer (b) highlights the idea that surgery involves expectations on the patient’s part
about the expertise and judgment of the physician, that the price of the surgery may not be fully
known in advance because the amount of work required may vary by patient case characteristics,
and that the physician agrees to a certain quality of performance and follow up in the case of any
adverse reactions to the surgery.
Reference: 1.1. What is Economics?/Terms of Trade
Level: Difficult
Chapter 1 Copyright © 2022
4
File: c01; Chapter 1 Choices: Money, Medicine, and Health
True/False
1) While the concept of value as related to health care has been discussed extensively, there is
still no way to compare health outcomes achieved to health care dollars spent.
Answer: False.
Reference: 1.1 What is Economics/Value in Health Care
Level: Easy
2) Recovering the investment is often cited by drug manufacturers as justification for the
extremely high prices that are charged for new medications.
Answer: True.
Reference: 1.1 What is Economics?/Value in Health Care
Level: Easy
3) Ranking everyone by the amount spent on medical care, most health care expenditures are
accounted for by a small percentage of people. . This phenomenon is called cost shifting.
Answer: False.
Response: The statement is correct; the explanation is incorrect. The situation describes only
the fact that medical expenses are incurred unevenly across all of the population, and does not
specify who pays the majority of the nation’s healthcare bill. The term cost shifting, however,
incorporates the comparison of who incurred the expenses versus who paid the bill.
Reference: 1.1 What Is Economics?/Financing Health Care AND 1.2 Flow of Funds/Health Care
Spending in the United States Level: Medium
4) Not only is the share of the GDP going to health care higher in 2020 than in 1929, the wages
of health care workers have risen more rapidly than for other types of labor.
Answer: True.
Reference: 1.2 Flow of Funds/ Health Care Providers: The Uses of Funds.
Level: Easy
Chapter 1 Copyright © 2022
1
,Getzen’s Health Economics and Financing, Sixth Edition Test Bank
5) The Flow of Funds idea emphasizes that total dollars spent by individuals, government and
other third party payers for health care must equal total income earned by health care providers,
administrators and other health care workers.
Answer: True.
Reference: 1.2 Flow of Funds.
Level: Easy
6) The hospital opens a cancer center in an adjacent abandoned building. Since it was an
abandoned building, there are no opportunity costs of this decision.
Answer: False.
Response: The building, as well as all other resources that were invested into the cancer center,
could have been used in an alternate way; to open a women’s health center, for instance. The
foregone benefits from opening a women’s health center would be the opportunity cost of this
decision.
Reference: 1.3 Economics Principles as Conceptual Tools/Opportunity Cost
Level: Medium
7) Socioeconomic differences in mortality found in the U.S. are most likely attributable to lack
of universal health insurance coverage.
Answer: False.
Response: Socioeconomic differences in mortality are noticed in other OECD countries as well
as in poorer countries like Ghana and Bangladesh.
Reference: 1.4 Health Disparities.
Level: Medium
8) When a drug company advertises it will provide a prescription drug at no charge to certain
individuals who cannot afford a doctor prescribed drug, costs are most likely being shifted away
from individuals who are paying high prices to those who are paying nothing.
Answer: False.
Response: Costs are being shifted to individuals who are paying high prices from those who are
paying nothing.
Reference: 1.1 What Is Economics?/Financing Health Care.
Level: Easy
Chapter 1 Copyright © 2022
2
,Getzen’s Health Economics and Financing, Sixth Edition Test Bank
9) A hospital system is rewarded with higher profits in the short term when it implements
electronic health records which increase the timeliness of physician and patient communication.
Answer: False.
Response: While it is possible that a hospital might realize higher patient revenues in the long
term if it increases its quality of service in the area of communication, it is unlikely that an
investment in electronic health records would result in a short term return. Further, the idea of a
hospital realizing a “profit” is questionable. Most hospitals are “not for profit” institutions,
which brings into question the maximizing goal of the hospital. This highlights the difference
between hospitals and the neoclassical profit-maximizing firms.
Reference: 1.1 What Is Economics?/Financing Health Care.
Level: Medium
10) As access to high-quality care has been steadily improving across the world, inequalities in
health can still be found only in relatively poor countries.
Answer: False.
Reference: 1.4 Health Disparities
Level: Easy
Chapter 1 Copyright © 2022
3
, Getzen’s Health Economics and Financing, Sixth Edition Test Bank
Multiple Choice
11) In which of the following examples does the fundamental theorem of exchange not apply?
a) You pay your optometrist $500 for a new pair of eyeglasses.
b) You donate your old, used eyeglasses to the Lions Club, a charitable organization which
recycles and distributes the glasses to needy people.
c) You pay a fertility specialist $10,000 to perform In Vitro Fertilization procedure which does
not result in pregnancy.
d) You pay a fertility specialist $10,000 to perform In Vitro Fertilization procedure which
results in pregnancy.
e) Unknown to you, your neighbor is tapping into your cable TV service and sharing your
service.
Answer: e
Response: The fundamental theorem of exchange rests on the idea that both parties engage in a
transaction because they expect to be made better off by entering it. In case (e), one neighbor is
stealing service that the other neighbor has not agreed to provide.
Reference: 1.1. What is Economics?
Level: Medium
12) To reduce the ache in your knees when you work out, you buy an elastic knee brace from
the pharmacy section at the grocery store. This transaction differs from paying a surgeon to
replace your knee joint because
a) the price of the knee brace is the same at all the local markets; however, the price for a knee
replacement cannot be determined.
b) the knee brace is basically the same product regardless of where you buy it or who you buy it
for, even though there may be different manufacturer brand names. However, each knee
replacement surgery is different, and its specifics vary according to the individual patient’s needs
and the individual physicians’ assessment and skills.
c) you are able to pay for the purchase of the knee brace from your health savings account.
d) you require a physician’s expertise to determine your need for the knee brace.
e) you expect that the transaction will result in alleviating your pain.
Answer: b
Response: Answer (b) highlights the idea that surgery involves expectations on the patient’s part
about the expertise and judgment of the physician, that the price of the surgery may not be fully
known in advance because the amount of work required may vary by patient case characteristics,
and that the physician agrees to a certain quality of performance and follow up in the case of any
adverse reactions to the surgery.
Reference: 1.1. What is Economics?/Terms of Trade
Level: Difficult
Chapter 1 Copyright © 2022
4
