1.Which of the following statements is correct?
a) Limited access to the health care system is a major cause of rising health care costs.
b) Rising health care costs are a major cause of limited access to the health care system.
c) Rising health care costs have forced employers to raise real wages above labor productivity.
d) The tax subsidy which government provides for health care causes health care to be underconsumed.

2.Refer to the above diagram. Suppose that the demand for loanable funds is D0 and the supply of loanable funds initially is S0. If the supply of loanable funds declines to S1, the equilibrium interest rate will:
a) decrease from G to F.
b) increase from E to F.
c) decrease from F to E.
d) increase from F to G.

3.Other things equal, and given that the elasticity of demand for health care is 0.2, a 10 percent increase in the price of health care in the United States will reduce the quantity of health care demanded by about:
a) 1 percent.
b) 2 percent.
c) 5 percent.
d) 10 percent.

4.Pure or economic profit is:
a) the amount by which accounting profits exceed normal profits.
b) determined by subtracting explicit costs from total revenue.
c) the return required to retain entrepreneurial talent in some particular line of production.
d) the return to any resource the supply of which is perfectly inelastic.

5.A normal profit is:
a) the average profitability of a firm over one complete business cycle.
b) calculated by subtracting explicit costs from total revenue.
c) the "price" required to retain entrepreneurial talent in some particular line of production.
d) the amount by which total revenue exceeds total costs.

6.Employer-provided private health insurance began in the United States because:
a) the rising threat of socialism prompted U.S. companies to provide insurance to dampen enthusiasm for socialist reform.
b) during World War II, wage and price controls forced employers to use nonwage forms of compensation to attract workers.
c) poor health conditions at the beginning of the 20th century prompted the U.S. government to require new companies to offer health insurance to employees.
d) the American Medical Association successfully lobbied the U.S. government to provide subsidies to companies offering private health insurance to employees.

7.In the market for loanable funds:
a) an increase in bank lending will increase the interest rate.
b) a decrease in saving will reduce the interest rate.
c) an increase in borrowing for investment will increase the interest rate.
d) a decrease in government borrowing will increase the interest rate.

8.A unique characteristic of taxes on economic rents is that such taxes:
a) stimulate aggregate production.
b) do not lead to a reallocation of the resource.
c) are paid by consumers.
d) are always regressive.