Test Bank Health Economics and Policy 6th Edition Henderson

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Health Economics and Policy 6th Edition Henderson Test Bank


ISBN-13: 978-1285758497

ISBN-10: 1285758498


Health Economics and Policy 6th Edition Henderson Test Bank


ISBN-13: 978-1285758497

ISBN-10: 1285758498



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Multiple Choice


  1. Opportunity cost is a measure of
  2. foregone opportunities.
  3. value based on the alternative not chosen.
  4. value in terms of the cost of production.
  5. the difference between production cost and resource cost.
  6. both a and b.


  1. The opportunity cost of investing in a new lithotripter (a machine that pulverizes kidney stones with sound waves) is
  2. defined by the dollar cost of the equipment.
  3. the same for every health care provider.
  4. measured by the difference between the expected revenues from selling the services of the lithotripter and the invoice cost of the machine.
  5. defined by the next best use of the money invested in the equipment.
  6. impossible to calculate.


  1. The “invisible hand” using Adam Smith’s terminology refers to
  2. government control of the market.
  3. market forces working through the price mechanism.
  4. the money supply that serves to keep the economy working smoothly.
  5. the role of innovation in maintaining a steady rate of growth.
  6. “behind-the-scenes” policy making to influence how markets allocate scarce resources.


  1. According to recent public opinion polls, what percentage of Americans are satisfied with the quality of the medical care they receive?
  2. 15 percent.
  3. 40 percent.
  4. 65 percent.
  5. 75 percent.
  6. 90 percent.


  1. Charging higher prices for one category of patients in order to provide free or subsidized care to another group is called
  2. price discrimination.
  3. cost-shifting.
  4. categorical costing.
  5. reprehensible and unethical.
  6. creative accounting.


  1. According to economic theory what is the optimal percentage of GDP to be spent on medical care?
  2. 6 percent.
  3. 8 percent.
  4. 10 percent.
  5. 12 percent.
  6. There is no widely-accepted way to determine the optimal percentage.


  1. What phrase best describes medical care spending in the United States in 1998?
  2. Total spending of more than $2 trillion represents 17 percent of GDP and approximately $8,000 per capita.
  1. Total spending of more than $1 trillion represents 14.8 percent of GDP and almost $6,000 per capita.
  2. Total spending of less than $1 trillion represents less than 13 percent of GDP and almost $3,000 per capita.
  3. Total spending is rising at double-digit rates and spending is soaring to over $5,000 per capita.
  4. Total spending is under control and represents a shrinking percentage of GDP.


  1. The 1974 federal legislation that exempted employers from certain state laws governing health insurance was
  2. COBRA
  3. ERISA
  4. CON
  5. HIPAA
  6. SCHIP


  1. Which of the following statements is based on positive analysis?
  2. Individuals without health insurance have less access to physicians’ services than those who have health insurance.
  3. The high cost of health insurance places S. firms at a competitive disadvantage with their foreign competitors.
  4. Employers should be required to provide health insurance for all full-time workers and their dependents.
  5. none of the above.
  6. Both a and b.


  1. Economists use the term “marginal” to describe costs and benefits
  2. that are minimal and hardly worth noting.
  3. that are incremental and thus relevant to decision making.
  4. that are noteworthy but not the most important.
  5. whose importance can be minimized through hard work.
  6. none of the above.


  1. Self insurance refers to the practice of setting aside funds to pay for medical care expenses instead of paying premiums to an insurance company. Approximately, _______ of all employees who participate in group insurance plans work for firms that self-insure.
  2. one-fourth
  3. one-third
  4. one-half
  5. two-thirds
  6. three-fourths


  1. Which of the following is not a characteristic that makes medical care different from other commodities?
  2. Demand for medical care is irregular.
  3. Sellers have more information than buyers.
  4. Third-party payers abound.
  5. For-profit providers play a major role in delivering medical care.
  6. The transaction itself if filled with uncertainty.


Structured Discussion:

  1. Resolved: The United States system of health care delivery is in a state of crisis.
  2. Resolved: The recent slowing of health care spending as a share of gross domestic product will continue. In other words, the relative size of the health care sector has reached a natural limit.


Appendix 1A: The Medical Care Price Index

This appendix demonstrates the use of price indexes to measure price changes.  Caution is advised in interpreting changes in fixed-weight indexes, such as the Consumer Price Index (CPI) and the Medical Care Price Index (MCPI), as a measure of inflation.  Problems in using the MCPI to measure medical inflation are discussed, including what to measure, how to account for quality improvements, and how to incorporate new products into the index.


Appendix Objectives

  1. Summarize the issues involved in measuring price changes with price indexes.
  2. Describe the use of the medical care price index in measuring changes in medical care prices.
  3. Specify alternatives for measuring price changes.

Appendix Outline


  1. Measuring price changes with index numbers
  2. Medical care price index
  3. Problems with using a fixed-weight index as a measure of inflation
  4. Measuring inputs instead of outcomes
  5. Measuring quality changes
  6. Accounting for new products
  7. Other problems

`                       a) Use of list prices

  1. b) Sampling
  2. c) Substitution bias
  3. Alternative methods to measure medical care inflation
  4. Summary and conclusions



Chapter 2: Using Economics to Study Health Care Issues

This chapter introduces the basic economics model of supply and demand and examines its use in the study of health care issues.  A discussion of the principles of optimizing behavior sets the stage for the development of the model of demand and supply.  A discussion of the theory of the firm follows, contrasting perfect and imperfect competition.  Supply- and demand-side imperfections are also discussed.

New Content in the 5th edition

This chapter uses “Is ‘Safe Sex’ Really Safe?” to show one way to use economics to analyze a health care issue.  The rest of the chapter is largely unchanged.  All tables have been updated.


Chapter Outline


  1. The relevance of economics in health care
  2. Critical assumptions in economics
  3. The scientific method
  4. Model building
  5. Problem solving
  6. Economic optimization
  7. Supply and demand
  8. The law of demand
  9. Price elasticity of demand
  10. The law of supply
  11. Equilibrium
  12. The competitive model
  13. Theory of firm behavior
  14. Price Ceilings and Price Floors
  15. The Impact of an Excise Tax
  16. Welfare implications
  17. Imperfect competition
  18. Summary and conclusions


Profile: Kenneth J. Arrow



Issues in Medical Care Delivery Back-of-the-Envelope
  • Is “Safe” Sex Really Safe?
  • Rhetoric in Economics
  • Using Game Theory to Study Economic Behavior
  • Positive and Normative Analysis
  • How to Survive Supply and Demand

Chapter Objectives

  1. Explain the use of economics as a framework for studying health care issues.
  2. Understand the limits of economics in explaining behavior in medical care markets.
  3. Recognize the importance of incentives in explaining individual behavior.
  4. Examine the basic economic model of demand and supply, including the concepts of equilibrium and elasticity.
  5. Understand and apply the model of firm behavior in medical markets.




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