QUESTION 1

Ranking everyone by the amount spent on medical care, 30 percent of the total (all expenditures for all people) is accounted for by the top 1 percent of patients. The top half of the population accounts for 90 percent of total spending. This is mostly due to cost shifting.
True
False
 
QUESTION 2

A hospital system is rewarded with higher profits in the short term when it implements electronic health records which increase the timeliness of physician and patient communication.
True
False
 
QUESTION 3

A person is willing to pay $50 per visit for physical therapy, but she pays $35 per visit. This person receives a consumer surplus of $85 per visit.
True
False
 
QUESTION 4

The Water-Diamonds Paradox is illustrated when water, which is essential for life, trades at a higher price than diamonds, which are not essential for life.
True
False
 
QUESTION 5

Which of the following is not an example of the fundamental theorem of exchange?
a.
You pay your optometrist $500 for a new pair of eyeglasses.
b.
You donate your old, used eyeglasses to the Lions Club, a charitable organization which recycles and distributes the glasses to needy people.
c.
You pay a fertility specialist $10,000 to perform In Vitro Fertilization procedure which does not result in pregnancy.
d.
You pay a fertility specialist $10,000 to perform In Vitro Fertilization procedure which results in pregnancy.
e.
Unknown to you, your neighbor is tapping into your cable TV service and sharing your service.
 
QUESTION 6

A podiatrist fits about 45 patients per week with new orthotic shoe inserts. She finds that by reducing the price of a follow-up visit from $30 to $20, the number of patients returning for a follow-up visit increases from 15 to 25. Further reducing the price from $20 to $5 increases the number of follow-up visits to 30.
a.
Marginal revenue (MR) generated by the price reduction from $30 to $20 is -50.
b.
Marginal revenue (MR) generated by the price reduction from $20 to $5 is 350.
c.
The elasticity of demand between quantity demanded of 15 and quantity demanded of 25 is -1.25.
d.
The elasticity of demand between quantity demanded of 25 and quantity demanded of 30 is -1.25.
e.
The elasticity of demand increases as one travels down the demand curve.
 
QUESTION 7

If my dentist decides to lower the price of teeth whitening treatments, total sales (revenues) for treatments will go up if:
a.
Excess supply for teeth whitening services exists
b.
Price elasticity is less than one
c.
Price elasticity is greater than one
d.
Excess demand for teeth whitening services exists
e.
Price elasticity of demand has changed
 
QUESTION 8

Price discrimination:
a.
Is an unethical way physicians charge wealthier patients more than other patients
b.
Occurs when the federal government gives fewer funds for Medicaid programs to higher income states
c.
Is easily practiced when goods and services can be purchased at lower prices and resold at higher prices
d.
Is only practiced by monopolists
 
QUESTION 9

The Principle of Diminishing Marginal Returns means:
a.
The more a good is consumed, the lower the average benefit from consumption
b.
The more of a good that is produced, the greater the benefit of the last good to the supplier
c.
The less of a good that is produced, the greater the average productivity of inputs
d.
The more of a good that is produced, the lower the productivity of the last input to production
e.
The more of a good that is produced, the greater the marginal productivity of the last input
 
QUESTION 10

Achieving economic efficiency in the market for hospital emergency room services differs from the perfectly competitive model because:
a.
Making dynamic technological advances means that some current efficiency must be sacrificed
b.
Management of personnel and technological inputs must be made in the face of certainty about medical outcomes
c.
Issues of access to services only matter in the perfectly competitive model
d.
Demand for emergency room care is highly elastic
e.
Cost minimization efforts might conflict with broader societal goals of compassion and palliative care in the emergency room
 
QUESTION 11

The agency relationship between physicians and patients is due to:
a.
Uncertainty about need for care
b.
Uncertainty about treatment quality and outcomes
c.
Licensure rules
d.
Educational backgrounds of physicians
e.
Non-profit status of hospitals
 
QUESTION 12

Price elasticity measures the:
a.
Change in quantity per unit change in price
b.
Change in price per unit change in quantity
c.
Percentage change in quantity for each 1% change in price
d.
Price sensitivity when quantity purchased changes
e.
Quantity divided by price
 
QUESTION 13

Scarcity means:
a.
Time and resources spent researching a cure for breast cancer are time and resources that could have been spent researching cures for lymphoma
b.
25 year olds might be more willing to start a family than 35 year olds
c.
Government funding of federal programs equals the amount paid in taxes
d.
Cost benefit analysis should always be used in evaluating medical need
e.
Money flows in a circle
 
QUESTION 14

Under the assumptions of perfect competition:
a.
Price acts as a rationing mechanism and one market equilibrium price and quantity combination is reached
b.
Equilibrium occurs where marginal revenue is greater than marginal cost
c.
Income and the price of substitutes vary along a demand curve
d.
Price discrimination is possible
e.
People willing to pay less than the market clearing price are able to purchase health care services
 
QUESTION 15

When a drug company advertises it will provide a prescription drug at no charge to certain individuals who cannot afford a doctor prescribed drug, costs are most likely being shifted away from individuals who are paying high prices to those who are paying nothing.
True
False
 
QUESTION 16

Buying a knee surgery is different from the assumptions of a purchase in the perfectly competitive market because:
a.
The seller has an ethical duty to care for you
b.
All buyers are price makers
c.
An equilibrium price is easily reached
d.
Information is freely available about knee surgeons
e.
None of the above
 
QUESTION 17

Government regulations and professional licensing of health care providers is a response to the nature of human response to illness and pain. Examples include all the following except:
a.
Requiring hospitals to report the number of hospital acquired infections to state agency
b.
Requiring for profit hospitals to pay income tax
c.
Requiring physicians to be licensed by the state
d.
Requiring FDA approval of cancer fighting drugs
e.
Requiring hospitals receiving Medicare funds to be approved by Medicare
 
QUESTION 18

To reduce the ache in your knees when you work out, you buy an elastic knee brace from the pharmacy section at the grocery store. This transaction differs from paying a surgeon to replace your knee joint because:
a.
The price of the knee brace is the same at all the local markets; however, the price for a knee replacement cannot be determined
b.
The knee brace is basically the same product, even though there may be different manufacturer brand names; however, each knee replacement varies slightly according to the individual patient's needs and the physicians' assessment and skills
c.
You are able to pay for the purchase of the knee brace from your health savings account
d.
You require a physician's expertise to determine your need for the knee brace
e.
You expect that the transaction will result in alleviating your pain
 
QUESTION 19

The market demand curve for aspirin:
a.
Is measured at a specific time and place
b.
Is comprised of all the individual demand curves
c.
Is a marginal benefit curve
d.
Slopes downward because the benefit from the tenth aspirin is much less than the benefit from the first aspirin
e.
All of the above
 
QUESTION 20

The dollar amount of health care expenditures paid by charitable organizations and individuals has remained roughly constant over the past 100 years, if one adjusts for inflation.
True
False