MHA 710 - Healthcare Economics -
Exam 3
Which of the following statements is true concerning the trend in community hospital
care between inpatient and outpatient services since the mid-1980s?
a. Both inpatient and outpatient services have been declining.
b. There has been no noticeable trend in either inpatient or outpatient services.
c. Both inpatient and outpatient services have been growing.
d. Outpatient services have been growing, while inpatient services have been declining.
e. Outpatient services have been declining, while inpatient services have been growing.
- CORRECT ANSWER-d. Outpatient services have been growing, while inpatient
services have been declining.
The amount that Medicare pays a hospital for treating a Medicare patient is determined:
a. at the point when the diagnosis is made.
b. at the time of admission to the hospital.
c. before the patient sees a physician.
d. after the hospital bill is reviewed by Medicare auditors.
e. after medical services are provided. - CORRECT ANSWER-a. at the point when the
diagnosis is made.
Compared to the not-for-profit organizational form, the for-profit environment
a. allows for the transfer of assets.
b. lacks a profit motive.
c. gives shareholders higher returns on their investment
d. provides patients with higher quality of care.
e. does not provide charity care. - CORRECT ANSWER-a. allows for the transfer of
assets.
What is the most significant cost of attending medical school?
a. Books and incidentals
b. Room and board
c. Tuition and fees
d. The income foregone - CORRECT ANSWER-d. The income foregone
Using the physician-control model to explain hospital behavior leads to which of the
following conclusions?
a. Other medical inputs tend to be overused to maximize physicians' productivity.
b. All investment decisions will be based on optimal resource use.
c. The use of operating rooms will be maximized with little excess capacity.
,d. Physicians will strive to use the nursing staff efficiently. - CORRECT ANSWER-a.
Other medical inputs tend to be overused to maximize physicians' productivity.
Economies of scale exist when:
a. long-run average costs decline as output increases.
b. long-run average costs increase as output increases.
c. long-run average costs are constant.
d. short-run average costs decline.
e. short-run average costs increase. - CORRECT ANSWER-a. long-run average costs
decline as output increases.
Which of the following statements about the distribution of physicians among specialties
is true in the United States?
a. There are twice as many generalists as there are specialists.
b. The majority of physicians specialize in general/family practice.
c. There are twice as many specialists as there are generalists.
d. The specialty distribution in the United States is similar to that of the rest of the world.
- CORRECT ANSWER-c. There are twice as many specialists as there are generalists.
In order to be a successful price discriminator, a provider must have a degree of market
power (depicted by a downward-sloping demand curve) and meet what other
condition(s)?
a. Customers cannot know that different prices are being charged.
b. Markets must be segmentable, identifying differences in ability to pay.
c. Demand for services must be relatively price elastic.
d. Profitable service expansion opportunities must be limited.
e. The provider must have excess capacity to accommodate the extra business. -
CORRECT ANSWER-b. Markets must be segmentable, identifying differences in ability
to pay.
Legislation considered by Congress to restrict legal immigration would:
a. surprise many policymakers because Congress finds it difficult to agree on much of
anything regarding immigration.
b. improve employment prospects for native-born Americans.
c. have little effect on medical markets, as so few physicians practicing medicine in the
United States are foreigners.
d. raise the costs of operating in many of the nation's rural and inner-city hospitals.
e. allow more Americans trained abroad to compete for openings in United States'
residency programs. - CORRECT ANSWER-d. raise the costs of operating in many of
the nation's rural and inner-city hospitals.
Physicians who own their own diagnostic testing facilities tend to order more tests,
charge higher fees for them, and have higher total bills to patients. This practice of self-
referral is an example of:
a. cognitive dissonance.
b. physician-induced demand.
, c. moral hazard.
d. adverse selection.
e. res ipsa loquitur. - CORRECT ANSWER-b. physician-induced demand.
Starting salaries for female obstetricians/gynecologists are higher than those of male
obstetricians/gynecologists . What is the best explanation for this?
a. There are more males in obstetrics/gynecology residency programs than females.
b. The demand for female obstetricians/gynecologists is greater than the demand for
male obstetricians/gynecologists .
c. The demand for female obstetricians/gynecologists is less than the demand for male
obstetricians/gynecologists .
d. Female obstetricians/gynecologists have more human capital than male
obstetricians/gynecologists . - CORRECT ANSWER-b. The demand for female
obstetricians/gynecologists is greater than the demand for male
obstetricians/gynecologists .
The rate of return on an investment in medical education:
a. will increase with an increase in the availability of student loans.
b. is inversely related to the number of years in the profession.
c. is much higher than the rate of return on an undergraduate business degree.
d. is inversely related to income.
e. is inversely related to the length of time spent in formal schooling - CORRECT
ANSWER-e. is inversely related to the length of time spent in formal schooling
Suppose the market for nursing services in a local community is so dominated by a
single community hospital that, for all practical purposes, it is considered a monopsony.
Using the diagram below, answer the question.
What is the equilibrium wage and level of employment under monopsony?
a. W0 and E1
b. W2 and E0
c. W0 and E0
d. W0 and E2
e. W1 and E1 - CORRECT ANSWER-c. W0 and E0
The following diagram depicts the market for physicians' services that is originally in
equilibrium at the point where demand and supply (D0 and S0) intersect. As physician
supply increases from S0 to S1, an even larger concurrent shift in demand from D0 to
D1:
a. will increase demand for physicians' services, but not spending.
b. will cause overall spending on physicians' services to increase.
c. will result in a new equilibrium at P2 and Q2.
d. will result in a decrease in the price of physicians' services.
Exam 3
Which of the following statements is true concerning the trend in community hospital
care between inpatient and outpatient services since the mid-1980s?
a. Both inpatient and outpatient services have been declining.
b. There has been no noticeable trend in either inpatient or outpatient services.
c. Both inpatient and outpatient services have been growing.
d. Outpatient services have been growing, while inpatient services have been declining.
e. Outpatient services have been declining, while inpatient services have been growing.
- CORRECT ANSWER-d. Outpatient services have been growing, while inpatient
services have been declining.
The amount that Medicare pays a hospital for treating a Medicare patient is determined:
a. at the point when the diagnosis is made.
b. at the time of admission to the hospital.
c. before the patient sees a physician.
d. after the hospital bill is reviewed by Medicare auditors.
e. after medical services are provided. - CORRECT ANSWER-a. at the point when the
diagnosis is made.
Compared to the not-for-profit organizational form, the for-profit environment
a. allows for the transfer of assets.
b. lacks a profit motive.
c. gives shareholders higher returns on their investment
d. provides patients with higher quality of care.
e. does not provide charity care. - CORRECT ANSWER-a. allows for the transfer of
assets.
What is the most significant cost of attending medical school?
a. Books and incidentals
b. Room and board
c. Tuition and fees
d. The income foregone - CORRECT ANSWER-d. The income foregone
Using the physician-control model to explain hospital behavior leads to which of the
following conclusions?
a. Other medical inputs tend to be overused to maximize physicians' productivity.
b. All investment decisions will be based on optimal resource use.
c. The use of operating rooms will be maximized with little excess capacity.
,d. Physicians will strive to use the nursing staff efficiently. - CORRECT ANSWER-a.
Other medical inputs tend to be overused to maximize physicians' productivity.
Economies of scale exist when:
a. long-run average costs decline as output increases.
b. long-run average costs increase as output increases.
c. long-run average costs are constant.
d. short-run average costs decline.
e. short-run average costs increase. - CORRECT ANSWER-a. long-run average costs
decline as output increases.
Which of the following statements about the distribution of physicians among specialties
is true in the United States?
a. There are twice as many generalists as there are specialists.
b. The majority of physicians specialize in general/family practice.
c. There are twice as many specialists as there are generalists.
d. The specialty distribution in the United States is similar to that of the rest of the world.
- CORRECT ANSWER-c. There are twice as many specialists as there are generalists.
In order to be a successful price discriminator, a provider must have a degree of market
power (depicted by a downward-sloping demand curve) and meet what other
condition(s)?
a. Customers cannot know that different prices are being charged.
b. Markets must be segmentable, identifying differences in ability to pay.
c. Demand for services must be relatively price elastic.
d. Profitable service expansion opportunities must be limited.
e. The provider must have excess capacity to accommodate the extra business. -
CORRECT ANSWER-b. Markets must be segmentable, identifying differences in ability
to pay.
Legislation considered by Congress to restrict legal immigration would:
a. surprise many policymakers because Congress finds it difficult to agree on much of
anything regarding immigration.
b. improve employment prospects for native-born Americans.
c. have little effect on medical markets, as so few physicians practicing medicine in the
United States are foreigners.
d. raise the costs of operating in many of the nation's rural and inner-city hospitals.
e. allow more Americans trained abroad to compete for openings in United States'
residency programs. - CORRECT ANSWER-d. raise the costs of operating in many of
the nation's rural and inner-city hospitals.
Physicians who own their own diagnostic testing facilities tend to order more tests,
charge higher fees for them, and have higher total bills to patients. This practice of self-
referral is an example of:
a. cognitive dissonance.
b. physician-induced demand.
, c. moral hazard.
d. adverse selection.
e. res ipsa loquitur. - CORRECT ANSWER-b. physician-induced demand.
Starting salaries for female obstetricians/gynecologists are higher than those of male
obstetricians/gynecologists . What is the best explanation for this?
a. There are more males in obstetrics/gynecology residency programs than females.
b. The demand for female obstetricians/gynecologists is greater than the demand for
male obstetricians/gynecologists .
c. The demand for female obstetricians/gynecologists is less than the demand for male
obstetricians/gynecologists .
d. Female obstetricians/gynecologists have more human capital than male
obstetricians/gynecologists . - CORRECT ANSWER-b. The demand for female
obstetricians/gynecologists is greater than the demand for male
obstetricians/gynecologists .
The rate of return on an investment in medical education:
a. will increase with an increase in the availability of student loans.
b. is inversely related to the number of years in the profession.
c. is much higher than the rate of return on an undergraduate business degree.
d. is inversely related to income.
e. is inversely related to the length of time spent in formal schooling - CORRECT
ANSWER-e. is inversely related to the length of time spent in formal schooling
Suppose the market for nursing services in a local community is so dominated by a
single community hospital that, for all practical purposes, it is considered a monopsony.
Using the diagram below, answer the question.
What is the equilibrium wage and level of employment under monopsony?
a. W0 and E1
b. W2 and E0
c. W0 and E0
d. W0 and E2
e. W1 and E1 - CORRECT ANSWER-c. W0 and E0
The following diagram depicts the market for physicians' services that is originally in
equilibrium at the point where demand and supply (D0 and S0) intersect. As physician
supply increases from S0 to S1, an even larger concurrent shift in demand from D0 to
D1:
a. will increase demand for physicians' services, but not spending.
b. will cause overall spending on physicians' services to increase.
c. will result in a new equilibrium at P2 and Q2.
d. will result in a decrease in the price of physicians' services.
