Health Economics and Policy, 8th Edition Solution Manual by Ja
j j j j j j j j j
mes W. Henderson.
j j
1 Opportunityjcostjisjajmeasurejof
a. foregonejopportunities.
b. valuejbasedjonjthejalternativejnotjchosen.
c. valuejinjtermsjofjthejcostjofjproduction.
d. thejdifferencejbetweenjproductionjcostjandjresourcejcost.
e. bothjajandjb.
2. Thejopportunityjcostjofjinvestingjinjajnewjlithotripterj(ajmachinejthatjpulverizesjkidneyjstonesjwi
thjsoundjwaves)jis
a. definedjbyjthejdollarjcostjofjthejequipment.
b. thejsamejforjeveryjhealthjcarejprovider.
c. measuredjbyjthejdifferencejbetweenjthejexpectedjrevenuesjfromjsellingjthejservicesjofj
thejlithotripterjandjthejinvoicejcostjofjthejmachine.
d. definedjbyjthejnextjbestjusejofjthejmoneyjinvestedjinjthejequipment.
e. impossiblejtojcalculate.
3. Thej“invisiblejhand”jusingjAdamjSmith’sjterminologyjrefersjto
a. governmentjcontroljofjthejmarket.
b. marketjforcesjworkingjthroughjthejpricejmechanism.
c. thejmoneyjsupplyjthatjservesjtojkeepjthejeconomyjworkingjsmoothly.
d. thejrolejofjinnovationjinjmaintainingjajsteadyjratejofjgrowth.
e. “behind-the-
scenes”j policyj makingj toj influencej howj marketsj allocatej scarcejresources.
4. Accordingjtojrecentjpublicjopinionjpolls,jwhatjpercentagejofjAmericansjarejsatisfiedjwithjthejqu
alityjofjthejmedicaljcarejtheyjreceive?
a. 15jpercent.
b. 40jpercent.
c. 65jpercent.
d. 70jpercent.
e. 90jpercent.
©j2015jCengagejLearning.jAlljRightsjReserved.jMayjnotjbejcopied,jscanned,jorjduplicated,jinjwholejor
injpart,jexceptjforjusejasjpermittedjinjajlicensejdistributedjwithjajcertainjproductjorjservicejorjotherwisejonj
ajpassword-protectedjwebsitejforjclassroomjuse.
,5. Chargingjhigherjpricesjforjonejcategoryjofjpatientsjinjorderjtojprovidejfreejorjsubsidizedjcarejtoj
anotherjgroupjisjcalled
a. pricejdiscrimination.
b. cost-shifting.
c. categoricaljcosting.
d. reprehensiblejandjunethical.
e. creativejaccounting.
6. AccordingjtojeconomicjtheoryjwhatjisjthejoptimaljpercentagejofjGDPjtojbejspentjonjmedicaljcar
e?
a. 6jpercent.
b. 8jpercent.
c. 10jpercent.
d. 12jpercent.
e. Therejisjnojwidely-acceptedjwayjtojdeterminejthejoptimaljpercentage.
7. WhatjphrasejbestjdescribesjmedicaljcarejspendingjinjthejUnitedjStatesjinj1998?
a. Totaljspendingjofjmorejthanj$2jtrillionjrepresentsj17jpercentjofjGDPjandjapproximately
$8,000jperjcapita.
b. Totaljspendingjofjmorejthanj$1jtrillionjrepresentsj14.8jpercentjofjGDPjandjalmostj$6,000jpe
rjcapita.
c. Totaljspendingjofjlessjthanj$1jtrillionjrepresentsjlessjthanj13jpercentjofjGDPjandjalmost
$3,000jperjcapita.
d. Totaljspendingjisjrisingjatjdouble-
digitjratesjandjspendingjisjsoaringjtojoverj$5,000jperjcapita.
e. TotaljspendingjisjunderjcontroljandjrepresentsjajshrinkingjpercentagejofjGDP.
8. Thej1974jfederaljlegislationjthatjexemptedjemployersjfromjcertainjstatejlawsjgoverningjhealthjin
surancejwas
a. COBRA
b. ERISA
c. CON
d. HIPAA
e. SCHIP
9. Whichjofjthejfollowingjstatementsjisjbasedjonjpositivejanalysis?
a. Individualsj withoutj healthj insurancej havej lessj accessj toj physicians’j servicesj thanjth
osejwhojhavejhealthjinsurance.
b. ThejhighjcostjofjhealthjinsurancejplacesjU.S.jfirmsjatjajcompetitivejdisadvantagejwithjth
eirjforeignjcompetitors.
c. Employersjshouldjbejrequiredjtojprovidejhealthjinsurancejforjalljfull-
timejworkersjandjtheirjdependents.
d. nonejofjthejabove.
©j2015jCengagejLearning.jAlljRightsjReserved.jMayjnotjbejcopied,jscanned,jorjduplicated,jinjwholejor
injpart,jexceptjforjusejasjpermittedjinjajlicensejdistributedjwithjajcertainjproductjorjservicejorjotherwisejonj
ajpassword-protectedjwebsitejforjclassroomjuse.
, e. Bothjajandjb.
10. Economistsjusejthejtermj“marginal”jtojdescribejcostsjandjbenefits
a. thatjarejminimaljandjhardlyjworthjnoting.
b. thatjarejincrementaljandjthusjrelevantjtojdecisionjmaking.
c. thatjarejnoteworthyjbutjnotjthejmostjimportant.
d. whosejimportancejcanjbejminimizedjthroughjhardjwork.
e. nonejofjthejabove.
11. Selfjinsurancejrefersjto:jthejpracticejofjsettingjasidejfundsjtojpayjforjmedicaljcarejexpensesjins
teadjofjpayingjpremiumsjtojanjinsurancejcompany.j Approximately,j
ofjalljemployeesjwhojparticipatejinjgroupjinsurancejplansjworkjforjfirmsjthatjself-insure.
a. startingjone’sjownjinsurancejcompany
b. buyingjinsurancejfromjajnotjforjprofitjentity
c. settingjasidejfundjtojpayjforjmedicaljcarejexpensesjinsteadjofjbuyingjinsurance
d. nonejofjthese
e. bothjajandjb
12. Whichjofjthejfollowingjisjnotjajcharacteristicjthatjmakesjmedicaljcarejdifferentjfromjotherjcom
modities?
a. Demandjforjmedicaljcarejisjirregular.
b. Sellersjhavejmorejinformationjthanjbuyers.
c. Third-partyjpayersjabound.
d. For-profitjprovidersjplayjajmajorjrolejinjdeliveringjmedicaljcare.
e. Thejtransactionjitselfjifjfilledjwithjuncertainty.
StructuredjDiscussion:
1. Resolved:jThejUnitedjStatesjsystemjofjhealthjcarejdeliveryjisjinjajstatejofjcrisis.
2. Resolved:j Thej recentj slowingj ofj healthj carej spendingj asj aj sharej ofj grossj domestic
productjwilljcontinue.j Injotherjwords,jthejrelativejsizejofjthejhealthjcarejsectorjhasjreac
hedjajnaturaljlimit.
Appendixj1A:jThejMedicaljCarejPricejIndex
Thisjappendixjdemonstratesjthejusejofjpricejindexesjtojmeasurejpricejchanges.j Cautionjisjadvisedj
injinterpretingjchangesjinjfixed-
weightjindexes,jsuchjasjthejConsumerjPricejIndexj(CPI)jandjthejMedicaljCarejPricejIndexj(MCPI),jasj
ajmeasurejofjinflation.j ProblemsjinjusingjthejMCPI
©j2015jCengagejLearning.jAlljRightsjReserved.jMayjnotjbejcopied,jscanned,jorjduplicated,jinjwholejor
injpart,jexceptjforjusejasjpermittedjinjajlicensejdistributedjwithjajcertainjproductjorjservicejorjotherwisejonj
ajpassword-protectedjwebsitejforjclassroomjuse.
, tojmeasurejmedicaljinflationjarejdiscussed,jincludingjwhatjtojmeasure,jhowjtojaccountjforjqualityjim
provements,jandjhowjtojincorporatejnewjproductsjintojthejindex.
AppendixjObjectives
1. Summarizejthejissuesjinvolvedjinjmeasuringjpricejchangesjwithjpricejindexes.
2. Describejthejusejofjthejmedicaljcarejpricejindexjinjmeasuringjchangesjinjmedicaljcarejpri
ces.
3. Specifyjalternativesjforjmeasuringjpricejchanges.
AppendixjOutline
a. Measuringjpricejchangesjwithjindexjnumbers
b. Medicaljcarejpricejindex
c. Problemsjwithjusingjajfixed-weightjindexjasjajmeasurejofjinflation
d. Measuringjinputsjinsteadjofjoutcomes
e. Measuringjqualityjchanges
f. Accountingjforjnewjproducts
g. Otherjproblems
h. Alternativejmethodsjtojmeasurejmedicaljcarejinflation
i. Summaryjandjconclusions
Chapter 2: Using Economics to Study Health Care Issues
j j j j j j j j
Thisjchapterjintroducesjthejbasicjeconomicsjmodeljofjsupplyjandjdemandjandjexaminesjitsjusejinjt
hejstudyjofjhealthjcarejissues.j Ajdiscussionjofjthejprinciplesjofjoptimizingjbehaviorjsetsjthejstagejf
orjthejdevelopmentjofjthejmodeljofjdemandjandjsupply.j Ajdiscussionjofjthejtheoryjofjthejfirmjfollo
ws,jcontrastingjperfectjandjimperfectjcompetition.j Supply-jandjdemand-
sidejimperfectionsjarejalsojdiscussed.
ChapterjOutline
a. Thejrelevancejofjeconomicsjinjhealthjcare
©j2015jCengagejLearning.jAlljRightsjReserved.jMayjnotjbejcopied,jscanned,jorjduplicated,jinjwholejor
injpart,jexceptjforjusejasjpermittedjinjajlicensejdistributedjwithjajcertainjproductjorjservicejorjotherwisejonj
ajpassword-protectedjwebsitejforjclassroomjuse.
j j j j j j j j j
mes W. Henderson.
j j
1 Opportunityjcostjisjajmeasurejof
a. foregonejopportunities.
b. valuejbasedjonjthejalternativejnotjchosen.
c. valuejinjtermsjofjthejcostjofjproduction.
d. thejdifferencejbetweenjproductionjcostjandjresourcejcost.
e. bothjajandjb.
2. Thejopportunityjcostjofjinvestingjinjajnewjlithotripterj(ajmachinejthatjpulverizesjkidneyjstonesjwi
thjsoundjwaves)jis
a. definedjbyjthejdollarjcostjofjthejequipment.
b. thejsamejforjeveryjhealthjcarejprovider.
c. measuredjbyjthejdifferencejbetweenjthejexpectedjrevenuesjfromjsellingjthejservicesjofj
thejlithotripterjandjthejinvoicejcostjofjthejmachine.
d. definedjbyjthejnextjbestjusejofjthejmoneyjinvestedjinjthejequipment.
e. impossiblejtojcalculate.
3. Thej“invisiblejhand”jusingjAdamjSmith’sjterminologyjrefersjto
a. governmentjcontroljofjthejmarket.
b. marketjforcesjworkingjthroughjthejpricejmechanism.
c. thejmoneyjsupplyjthatjservesjtojkeepjthejeconomyjworkingjsmoothly.
d. thejrolejofjinnovationjinjmaintainingjajsteadyjratejofjgrowth.
e. “behind-the-
scenes”j policyj makingj toj influencej howj marketsj allocatej scarcejresources.
4. Accordingjtojrecentjpublicjopinionjpolls,jwhatjpercentagejofjAmericansjarejsatisfiedjwithjthejqu
alityjofjthejmedicaljcarejtheyjreceive?
a. 15jpercent.
b. 40jpercent.
c. 65jpercent.
d. 70jpercent.
e. 90jpercent.
©j2015jCengagejLearning.jAlljRightsjReserved.jMayjnotjbejcopied,jscanned,jorjduplicated,jinjwholejor
injpart,jexceptjforjusejasjpermittedjinjajlicensejdistributedjwithjajcertainjproductjorjservicejorjotherwisejonj
ajpassword-protectedjwebsitejforjclassroomjuse.
,5. Chargingjhigherjpricesjforjonejcategoryjofjpatientsjinjorderjtojprovidejfreejorjsubsidizedjcarejtoj
anotherjgroupjisjcalled
a. pricejdiscrimination.
b. cost-shifting.
c. categoricaljcosting.
d. reprehensiblejandjunethical.
e. creativejaccounting.
6. AccordingjtojeconomicjtheoryjwhatjisjthejoptimaljpercentagejofjGDPjtojbejspentjonjmedicaljcar
e?
a. 6jpercent.
b. 8jpercent.
c. 10jpercent.
d. 12jpercent.
e. Therejisjnojwidely-acceptedjwayjtojdeterminejthejoptimaljpercentage.
7. WhatjphrasejbestjdescribesjmedicaljcarejspendingjinjthejUnitedjStatesjinj1998?
a. Totaljspendingjofjmorejthanj$2jtrillionjrepresentsj17jpercentjofjGDPjandjapproximately
$8,000jperjcapita.
b. Totaljspendingjofjmorejthanj$1jtrillionjrepresentsj14.8jpercentjofjGDPjandjalmostj$6,000jpe
rjcapita.
c. Totaljspendingjofjlessjthanj$1jtrillionjrepresentsjlessjthanj13jpercentjofjGDPjandjalmost
$3,000jperjcapita.
d. Totaljspendingjisjrisingjatjdouble-
digitjratesjandjspendingjisjsoaringjtojoverj$5,000jperjcapita.
e. TotaljspendingjisjunderjcontroljandjrepresentsjajshrinkingjpercentagejofjGDP.
8. Thej1974jfederaljlegislationjthatjexemptedjemployersjfromjcertainjstatejlawsjgoverningjhealthjin
surancejwas
a. COBRA
b. ERISA
c. CON
d. HIPAA
e. SCHIP
9. Whichjofjthejfollowingjstatementsjisjbasedjonjpositivejanalysis?
a. Individualsj withoutj healthj insurancej havej lessj accessj toj physicians’j servicesj thanjth
osejwhojhavejhealthjinsurance.
b. ThejhighjcostjofjhealthjinsurancejplacesjU.S.jfirmsjatjajcompetitivejdisadvantagejwithjth
eirjforeignjcompetitors.
c. Employersjshouldjbejrequiredjtojprovidejhealthjinsurancejforjalljfull-
timejworkersjandjtheirjdependents.
d. nonejofjthejabove.
©j2015jCengagejLearning.jAlljRightsjReserved.jMayjnotjbejcopied,jscanned,jorjduplicated,jinjwholejor
injpart,jexceptjforjusejasjpermittedjinjajlicensejdistributedjwithjajcertainjproductjorjservicejorjotherwisejonj
ajpassword-protectedjwebsitejforjclassroomjuse.
, e. Bothjajandjb.
10. Economistsjusejthejtermj“marginal”jtojdescribejcostsjandjbenefits
a. thatjarejminimaljandjhardlyjworthjnoting.
b. thatjarejincrementaljandjthusjrelevantjtojdecisionjmaking.
c. thatjarejnoteworthyjbutjnotjthejmostjimportant.
d. whosejimportancejcanjbejminimizedjthroughjhardjwork.
e. nonejofjthejabove.
11. Selfjinsurancejrefersjto:jthejpracticejofjsettingjasidejfundsjtojpayjforjmedicaljcarejexpensesjins
teadjofjpayingjpremiumsjtojanjinsurancejcompany.j Approximately,j
ofjalljemployeesjwhojparticipatejinjgroupjinsurancejplansjworkjforjfirmsjthatjself-insure.
a. startingjone’sjownjinsurancejcompany
b. buyingjinsurancejfromjajnotjforjprofitjentity
c. settingjasidejfundjtojpayjforjmedicaljcarejexpensesjinsteadjofjbuyingjinsurance
d. nonejofjthese
e. bothjajandjb
12. Whichjofjthejfollowingjisjnotjajcharacteristicjthatjmakesjmedicaljcarejdifferentjfromjotherjcom
modities?
a. Demandjforjmedicaljcarejisjirregular.
b. Sellersjhavejmorejinformationjthanjbuyers.
c. Third-partyjpayersjabound.
d. For-profitjprovidersjplayjajmajorjrolejinjdeliveringjmedicaljcare.
e. Thejtransactionjitselfjifjfilledjwithjuncertainty.
StructuredjDiscussion:
1. Resolved:jThejUnitedjStatesjsystemjofjhealthjcarejdeliveryjisjinjajstatejofjcrisis.
2. Resolved:j Thej recentj slowingj ofj healthj carej spendingj asj aj sharej ofj grossj domestic
productjwilljcontinue.j Injotherjwords,jthejrelativejsizejofjthejhealthjcarejsectorjhasjreac
hedjajnaturaljlimit.
Appendixj1A:jThejMedicaljCarejPricejIndex
Thisjappendixjdemonstratesjthejusejofjpricejindexesjtojmeasurejpricejchanges.j Cautionjisjadvisedj
injinterpretingjchangesjinjfixed-
weightjindexes,jsuchjasjthejConsumerjPricejIndexj(CPI)jandjthejMedicaljCarejPricejIndexj(MCPI),jasj
ajmeasurejofjinflation.j ProblemsjinjusingjthejMCPI
©j2015jCengagejLearning.jAlljRightsjReserved.jMayjnotjbejcopied,jscanned,jorjduplicated,jinjwholejor
injpart,jexceptjforjusejasjpermittedjinjajlicensejdistributedjwithjajcertainjproductjorjservicejorjotherwisejonj
ajpassword-protectedjwebsitejforjclassroomjuse.
, tojmeasurejmedicaljinflationjarejdiscussed,jincludingjwhatjtojmeasure,jhowjtojaccountjforjqualityjim
provements,jandjhowjtojincorporatejnewjproductsjintojthejindex.
AppendixjObjectives
1. Summarizejthejissuesjinvolvedjinjmeasuringjpricejchangesjwithjpricejindexes.
2. Describejthejusejofjthejmedicaljcarejpricejindexjinjmeasuringjchangesjinjmedicaljcarejpri
ces.
3. Specifyjalternativesjforjmeasuringjpricejchanges.
AppendixjOutline
a. Measuringjpricejchangesjwithjindexjnumbers
b. Medicaljcarejpricejindex
c. Problemsjwithjusingjajfixed-weightjindexjasjajmeasurejofjinflation
d. Measuringjinputsjinsteadjofjoutcomes
e. Measuringjqualityjchanges
f. Accountingjforjnewjproducts
g. Otherjproblems
h. Alternativejmethodsjtojmeasurejmedicaljcarejinflation
i. Summaryjandjconclusions
Chapter 2: Using Economics to Study Health Care Issues
j j j j j j j j
Thisjchapterjintroducesjthejbasicjeconomicsjmodeljofjsupplyjandjdemandjandjexaminesjitsjusejinjt
hejstudyjofjhealthjcarejissues.j Ajdiscussionjofjthejprinciplesjofjoptimizingjbehaviorjsetsjthejstagejf
orjthejdevelopmentjofjthejmodeljofjdemandjandjsupply.j Ajdiscussionjofjthejtheoryjofjthejfirmjfollo
ws,jcontrastingjperfectjandjimperfectjcompetition.j Supply-jandjdemand-
sidejimperfectionsjarejalsojdiscussed.
ChapterjOutline
a. Thejrelevancejofjeconomicsjinjhealthjcare
©j2015jCengagejLearning.jAlljRightsjReserved.jMayjnotjbejcopied,jscanned,jorjduplicated,jinjwholejor
injpart,jexceptjforjusejasjpermittedjinjajlicensejdistributedjwithjajcertainjproductjorjservicejorjotherwisejonj
ajpassword-protectedjwebsitejforjclassroomjuse.
