Question 1

A situation in which having insurance causes people to take greater risks is called:

a) Adverse Selection

b) Moral Hazard

c) A mixed market

d) Asymmetric Information

Question 2

Public goods are:

a) Rival and excludable

b) Rival and nonexcludable

c) Nonrival and nonexcludable

d) Nonrival and excludable

Question 3

How have insurance companies attempted to overcome the adverse selection problem?

a) They have switched to experience rating (which bases premiums based on historical medical costs of a given firm)

b) They discourage institutions from providing group insurance in an attempt to keep high-risk individuals out of the pool of customers.

c) They lower premiums to encourage lower risk people to buy insurance

d) All of the above

Question 4

Which of the following is a correct statement?

a) Both purely competitive and monopolistic firms are "price takers."

b) Both purely competitive firms and monopolistic firms are "price makers"

c) A purely competitive firm is a "price-taker" and a monopolistic firm is a "price-maker"

d) A purely competitive firm is a "price-maker" and a monopolistic firm is a "price-taker"

Question 5

The demand curve confronted by the individual purely competitive firm is:

a) Relatively Elastic

b) Perfectly elastic

c) Relatively inelastic

d) Perfectly inelastic

Question 6

Pure monopolists may obtain economic profit in the long-run because:

a) Of advertising

b) Marginal revenue is constant as sales increase

c) Of barriers to entry

d) Of rising average fixed costs

Question 7

What is the marginal principal? Provide an example of marginal principal related to health economics

Question 8

Under what conditions will a firm be able to price discriminate?

Question 9

An industry is characterized as having many firms, a differentiated product, no barriers to entry and elastic demand. What is it's market structure?

Perfectly competitive

Oligopoly

Monopolistic Competition

Monopoly

Question 10

The individual mandate under the Affordable Care Act was intended to prevent which of the following?

a) Rising health care costs

b) The number of uninsured

c) Adverse selection

d) Moral hazard

Question 11

Which of the following conditions is NOT NECESSARY in order for a firm to price discriminate?

The product cannot be resold

The firm must have some market power

The firm must have many buyers and sellers

The market can be segmented into different groups of consumers

Question 12

Which of the following statements correctly identifies economies of scale in production?

The long-run average cost of production does not change as quantity supplied increases

The long-run average-cost of production decreases as the quantity supplied increases

The long-run total cost of production decreases as the quantity supplied increases

The long run average cost of production increases as the quantity supplied increases

Question 13

Which of the following correctly identifies the price at which a firm should shut-down?

Price is greater than the average variable cost

Price is equal to the marginal cost

Price is less than the total cost

Price is less than the average variable cost

Question 14

Which of the following market structures experiences a "Nash Equilibrium" in terms of pricing behavior?

Perfect competition

Oligopoly

Monopoly

Monopolistic Competition

Question 15

Which of the following is NOT considered a criteria of an "efficient market"?

Perfect information

Positive externalities exist

Lots of buyers and sellers

No barriers to entry and market is perfectly competitive

Question 16

The Affordable Care Act DOES NOT directly address which of the following market failures or inefficiencies

Access problems when individuals have pre-existing conditions

Unsustainable increase in health care costs in long-run

Adverse selection

Health insurance not affordable to low income individuals and families

Question 17

For which of the following goods is the demand curve likely to be the most inelastic?

Taxicab transportation for a family vacationing in DC

Insulin for a diabetic

An Apple Smartphone

Elective cosmetic surgery

Question 18

Which of the following is the best example of a public good?

National defense

A local gas station

A city-owned electric power generating plan

Public Universities

Question 19

A perfectly competitive firm has the following option with respect to how it sets price:

Are required to accept below-market prices if they wish to sell their product

Often set the price of their product above the market equilibrium to take advantage of market imperfections

Have a great deal of latitude when it comes to setting the price of their product

Have little choice but to accept the prevailing market price for their product

Question 20

Which of the following is NOT a basic characteristic of a monopoly?

There is only one firm in the industry

There are no close substitutes for the product

The demand for the monopolist's product is highly inelastic

There are barriers to entry into the market.