Healthcare Economics Midterm Exam

Analytic Critique and Essay Questions -

1. Using both a production possibilities curve and a production of health graph, appraise this statement: When society allocates resources toward medical care in order to improve population health, it is not necessary to divert resources from the production of other goods and services.

2. In order to promote more exercise among teens and young adults, suppose that a new, national public health campaign using social media is very successful in motivating this population to actively pursue gym memberships.

a. Appraise this statement: The public health campaign will result in decreased prices of gym membership as well as decreased quantity of teens and young adults buying memberships.

b. Now suppose that the supply of gym facilities increases dramatically as a result of new tax incentives. Putting your answer to part (a) together with this new phenomenon (supply increases), what will the combined impact be on price and quantity of gym memberships? Will price and quantity go up, down, or can we not be sure?

3. Suppose that Ralph's income is $175,000 per year. He can spend it on healthcare visits (V) or on all other goods (OG). The price per V is $500, and the price per OG is $100.

a. Draw Ralph's budget constraint (put V on the horizontal and OG on the vertical axis). Using an indifference curve, show Ralph's optimum if he buys 1,600 OG per year. Show values of all intercepts and points of interest.

b. Suppose that the price per OG increases to $150, and that as a result Ralph reduces his consumption of OG to 1,500. Draw the new budget constraint and indifference curve. Show values of all intercepts and points of interest.

c. What is Benjamin's price elasticity of demand for OG?

4. Please answer this question in one brief paragraph of only 3-5 sentences. (Warning: if you write more than that, then you risk having points deducted.) NO GRAPHS required for this question. Consider the following: There are only 365 days in a year. When Jill works, she earns income. When Jill plays, she does not earn income, but she really enjoys herself. Sometimes Jill is sick, and can neither work nor play. Jill wants to be healthy, too. Appraise this statement: The problem is, since there are only 365 days in a year, if Jill spends time investing in her health, such as by exercising, then she will have to sacrifice both income and play time. Thus, if she wants to earn a good income and also to enjoy leisure, then investing in her health can only be considered a waste of time.

Multiple-choice questions -

1. Rather than aggregate health expenditures, we often look at real expenditures per capita. This calculation requires us to deflate the aggregate expenditures by:

a. Answers (b) and (c) are correct.

b. the purchasing power of the currency.

c. the size of the population.

d. the cost of health care.

2. Health care expenditures have risen as a portion of the GDP in all countries because:

a. Answers (b) and (d) are correct.

b. Populations have become less healthy.

c. Patients and their providers are using more expensive technologies.

d. Physicians are prescribing unnecessary services.

3. The term equity refers to:

a. the efficient production of services.

b. government provision of health care.

c. equal treatment of all individuals.

d. competition among health providers.

4. Economists view _____ as the ultimate scarce resource.

a. money

b. health

c. time

d. answers (a) and (b) are correct.

5. Insurance has a major impact on expenditures in the health economy. Since 1960 the share of health expenditures paid for by third parties has risen from about ____ percent to over _____ percent.

a. 20; 40

b. 30; 65

c. 60; 95

d. 45; 80

6. Asymmetry of information may mean that:

a. neither the provider nor the patient has all of the information.

b. the provider has more information than the patient.

c. the patient has no information.

d. Answers (b) and (c) are correct.

7. On the graph above, the curved lines refer to:

a. indifference curves where utility is constant

b. downward sloping demand curves

c. marginal utility curves, relating beef to chicken

d. total utility curves relating income to chicken

8. Suppose that the consumer is at point C. Line GE represents:

a. the demand for chicken.

b. the demand for beef.

c. the consumer's current budget constraint.

d. None of the above.

9. Fuchs's Utah-Nevada comparison implies that _____  makes the largest difference in the production of health.

a. geography

b. climate.

c. health care

d. life style

10. Studies have found that higher levels of prescription drug use are positively correlated with life expectancies. This means that:

a. national health insurance leads people to buy more prescription drugs.

b. prescription drugs are productive in improving people's health.

c. people with higher incomes consume more prescription drugs.

d. countries should shift their spending from education to prescription drugs.

11. Economists generally focus on schooling rather than education because:

a. it is easier to focus policies on schooling.

b. they measure the same thing.

c. although education includes both formal and informal training, including schooling, schooling is easier to measure.

d. schooling is more important than education.

12. Health can be described as a capital good because:

a. we forego current consumption to improve health, which lasts into the future.

b. we use capital goods and technology to produce it.

c. we can increase it or let it depreciate through investment.

d. Answers (a) and (c) are correct.

13. People do not spend all of their time producing health because:

a. they do not desire additional health.

b. there is decreasing marginal productivity of time spent in producing health.

c. activities other than health production increase their utility.

d. answers (b) and (c) are correct.

14. Improved health increases one's well-being because one

a. Answers (b) and (c) are correct

b. has more healthy time.

c. can earn more money per hour while working.

d. can work less..

15. Education may be an important determinant of health care demand because:

a. better educated people are more likely to engage in risky health behaviors

b. better education means that people know which goods are better or worse for them.

c. people must buy less health care in order to get more education.

d. people must earn more money to get more health care.

16. Low income Americans are found to receive worse care than others as evaluated by 15 of 20 core measures. This difference can be explained by:

a. lower income.

b. worse access to care.

c. different care-seeking behaviors.

d. answers (a) - (c) are correct.