ECON 530 - Exam 1Questions with
Verified Answers
health economics - ANSWERSthe application of economic theories, tools, and concepts
of economics as a discipline to the topics of health and healthcare
concerned with issues related to the allocation of scarce resources to improve health,
this includes both resource allocation within the economy to the health sector and within
the healthcare system to different activities and individuals
adverse selection - ANSWERSa situation often resulting from asymmetric information in
which individuals are able to purchase insurance at the rates that are below actuarially
fair rates plus loading costs
an event in healthcare whereby one part decides not to reveal the full extent of their risk
profile to the other party
a situation in which individuals of different risk types decide whether or not to buy
insurance
an information problem that is a source of market failure: low-risk individuals want
insurance, but it is unavailable to them at a reasonable price
moral hazard - ANSWERSthe possibility of consumers or providers exploiting a benefit
system unduly to the disadvantages of other consumers, providers, or the financing
community as a whole
supplier-induced demand - ANSWERSan insurance term that represents the
disincentives created by insurance for individual to take measures that would reduce the
amount of care demanded
in healthcare, it is more commonly used to express the additional quantity of healthcare
demanded, resulting from a decrease in the net price of care attributable to insurance
moral hazard - ANSWERSarises where the attitudes and behavior of a person or
organization change once they are covered for potential costs or losses
asymmetric information - ANSWERSsituations in which the parties on the opposite
sides of transaction have differing amounts of relevant information
doctors have more knowledge and information about medicine than
patients/consumers, the individual may not be the best judge of his/her own interests,
the doctor acts as an agent of the patients demand
,health - ANSWERSa state either of an individual or of a community
effected by poverty, level of education, food intake, access to clean water and sanitary
and housing conditions
the narrowest concept sees it as a measure of the state of the physical body organs
a broader concept is the ability of the body as a whole to function
WHO health - ANSWERSa state of physical, mental, and social well-being and not
merely the absence of disease or infirmity
a more holistic view
sees the health of an individual or community as being concerned not only with physical
(and mental) status, but also with social and economic relationships
broader interventions, including community empowerment and anti-poverty measures,
are necessary to promote health
Health economics - ANSWERSis the branch of economics that studies the healthcare
system, attempts to explain the healthcare system so we can better understand it, and
recommends ways to improve the healthcare system and increase its efficiency
In the market for medical care, patients often rely on physicians for information to make
their medical decisions or allow physicians to make these decisions for them. If the
physician is an imperfect agent and is paid fee-for-service this may result in -
ANSWERSthe physician recommending unnecessary medical services for financial gain
Which of the factors affect the health of a person?
a. Access to health care
b. Level of education
c. Food intake
d. All of the above - ANSWERSAll of the above
Since the 1960s, medical care spending has been growing faster than the economy
measured by the gross domestic product (GDP). Many economists believe this rapid
growth in medical care spending is a problem because - ANSWERSgovernment must
devote a larger share of its budget to financing medical care, which means it has less
money to spend on education, roads, and other public goods we value
Which is true about the healthcare expenditure across the globe?
, a. People living in rich countries are generally healthier. Therefore, they do not spend as
much money as the poorer countries
b. Poorer countries spend more money on healthcare than richer countries
c. More populated countries spend less in healthcare in per capita than less populated
countries
d. None of the above - ANSWERSMore populated countries spend less in healthcare in
per capita than less populated countries
Health economic encompasses - ANSWERSsupply and demand for health care,
allocation of health care resources, and the determination of health care resources
Joe Smith is a health 24 year old that expects to incur healthcare costs of less than
$500 in a typical year. The annual premium that he must pay for health insurance is
$2,000, which is the same premium that an unhealthy person must pay. Joe chooses
not to buy health insurance. This type of behavior results in which of the following?
a. Larger profits for health insurers
b. Adverse selection in health insurance pools
c. Demand uncertainty for medical care
d. Supplier induced demand by health insurers - ANSWERSAdverse selection in health
insurance pools
Moral hazard occurs in medical markets when - ANSWERSpatients don't pay the full
cost of the medical care they consume
According to WHO, which person is considered "healthy"?
a. Someone who is disease free
b. Someone who is psychologically sound
c. Someone who is social
d. All of the above - ANSWERSAll of the above
Which of the questions below is "Health Economics" NOT concerned with?
a. How to provide healthcare?
b. What kind of healthcare should be provided?
c. Should the poor get more healthcare than the rich?
d. What is the value of healthcare? - ANSWERSShould the poor get more healthcare
than the rich?
incremental analysis - ANSWERSthe effects of changes in the use of resources are
examined according to how they differ from current use
these principles focus on marginal benefit
Verified Answers
health economics - ANSWERSthe application of economic theories, tools, and concepts
of economics as a discipline to the topics of health and healthcare
concerned with issues related to the allocation of scarce resources to improve health,
this includes both resource allocation within the economy to the health sector and within
the healthcare system to different activities and individuals
adverse selection - ANSWERSa situation often resulting from asymmetric information in
which individuals are able to purchase insurance at the rates that are below actuarially
fair rates plus loading costs
an event in healthcare whereby one part decides not to reveal the full extent of their risk
profile to the other party
a situation in which individuals of different risk types decide whether or not to buy
insurance
an information problem that is a source of market failure: low-risk individuals want
insurance, but it is unavailable to them at a reasonable price
moral hazard - ANSWERSthe possibility of consumers or providers exploiting a benefit
system unduly to the disadvantages of other consumers, providers, or the financing
community as a whole
supplier-induced demand - ANSWERSan insurance term that represents the
disincentives created by insurance for individual to take measures that would reduce the
amount of care demanded
in healthcare, it is more commonly used to express the additional quantity of healthcare
demanded, resulting from a decrease in the net price of care attributable to insurance
moral hazard - ANSWERSarises where the attitudes and behavior of a person or
organization change once they are covered for potential costs or losses
asymmetric information - ANSWERSsituations in which the parties on the opposite
sides of transaction have differing amounts of relevant information
doctors have more knowledge and information about medicine than
patients/consumers, the individual may not be the best judge of his/her own interests,
the doctor acts as an agent of the patients demand
,health - ANSWERSa state either of an individual or of a community
effected by poverty, level of education, food intake, access to clean water and sanitary
and housing conditions
the narrowest concept sees it as a measure of the state of the physical body organs
a broader concept is the ability of the body as a whole to function
WHO health - ANSWERSa state of physical, mental, and social well-being and not
merely the absence of disease or infirmity
a more holistic view
sees the health of an individual or community as being concerned not only with physical
(and mental) status, but also with social and economic relationships
broader interventions, including community empowerment and anti-poverty measures,
are necessary to promote health
Health economics - ANSWERSis the branch of economics that studies the healthcare
system, attempts to explain the healthcare system so we can better understand it, and
recommends ways to improve the healthcare system and increase its efficiency
In the market for medical care, patients often rely on physicians for information to make
their medical decisions or allow physicians to make these decisions for them. If the
physician is an imperfect agent and is paid fee-for-service this may result in -
ANSWERSthe physician recommending unnecessary medical services for financial gain
Which of the factors affect the health of a person?
a. Access to health care
b. Level of education
c. Food intake
d. All of the above - ANSWERSAll of the above
Since the 1960s, medical care spending has been growing faster than the economy
measured by the gross domestic product (GDP). Many economists believe this rapid
growth in medical care spending is a problem because - ANSWERSgovernment must
devote a larger share of its budget to financing medical care, which means it has less
money to spend on education, roads, and other public goods we value
Which is true about the healthcare expenditure across the globe?
, a. People living in rich countries are generally healthier. Therefore, they do not spend as
much money as the poorer countries
b. Poorer countries spend more money on healthcare than richer countries
c. More populated countries spend less in healthcare in per capita than less populated
countries
d. None of the above - ANSWERSMore populated countries spend less in healthcare in
per capita than less populated countries
Health economic encompasses - ANSWERSsupply and demand for health care,
allocation of health care resources, and the determination of health care resources
Joe Smith is a health 24 year old that expects to incur healthcare costs of less than
$500 in a typical year. The annual premium that he must pay for health insurance is
$2,000, which is the same premium that an unhealthy person must pay. Joe chooses
not to buy health insurance. This type of behavior results in which of the following?
a. Larger profits for health insurers
b. Adverse selection in health insurance pools
c. Demand uncertainty for medical care
d. Supplier induced demand by health insurers - ANSWERSAdverse selection in health
insurance pools
Moral hazard occurs in medical markets when - ANSWERSpatients don't pay the full
cost of the medical care they consume
According to WHO, which person is considered "healthy"?
a. Someone who is disease free
b. Someone who is psychologically sound
c. Someone who is social
d. All of the above - ANSWERSAll of the above
Which of the questions below is "Health Economics" NOT concerned with?
a. How to provide healthcare?
b. What kind of healthcare should be provided?
c. Should the poor get more healthcare than the rich?
d. What is the value of healthcare? - ANSWERSShould the poor get more healthcare
than the rich?
incremental analysis - ANSWERSthe effects of changes in the use of resources are
examined according to how they differ from current use
these principles focus on marginal benefit
