Question 1

Which of the following best describes the concept of 'adverse selection' in the health insurance market?

Accepted Answer

When individuals who are more likely to use health insurance are also more likely to purchase it, leading to higher premiums.

Question 2

Suppose the government subsidizes vaccinations because they generate positive externalities. Which of the following best explains why this policy can increase social welfare?

Accepted Answer

Subsidies align the marginal private benefit with the marginal social benefit, increasing the quantity of vaccinations toward the socially optimal level.

Question 3

Which of the following equations represents the deadweight loss from underconsumption of a good with positive externalities, such as vaccinations?

Accepted Answer

$$ DWL = \frac{1}{2} (Q^* - Q_e) (MSB - MPB) $$

Question 4

Which of the following is NOT a reason for the rapid rise in U.S. health care costs, according to the study materials?

Accepted Answer

A dramatic increase in paperwork costs, which account for the majority of rising expenditures.

Question 5

In the context of health care, what is the principal-agent problem?

Accepted Answer

When doctors (agents) may pursue their own interests rather than those of the insurance company (principal) that pays them.

Question 6

Which of the following best describes the effect of the Affordable Care Act (ACA) on the proportion of uninsured Americans?

Accepted Answer

It decreased the proportion of uninsured Americans by introducing subsidies and mandates.

Question 7

If health care were a public good, which of the following characteristics would it exhibit?

Accepted Answer

Non-rivalry and non-excludability.

Question 8

Which of the following is a likely consequence of the tax exemption for employer-provided health insurance in the United States?

Accepted Answer

Employees receive more generous health insurance plans than they would choose if taxed, leading to higher overall health care spending.

Question 9

Which of the following best explains why the United States spends a higher proportion of income on health care than other high-income countries?

Accepted Answer

The U.S. health care system relies heavily on private firms and insurance, leading to higher prices and greater demand.

Question 10

A patient with health insurance chooses to visit the doctor for minor issues more frequently than before. This is an example of:

Accepted Answer

Moral hazard

Question 11

Which of the following policies would most directly address the problem of adverse selection in health insurance?

Accepted Answer

Mandating that all individuals purchase health insurance.

Question 12

Which of the following is a negative externality associated with poor health choices such as smoking or obesity?

Accepted Answer

Higher premiums and taxes for others who share the cost of increased health care.

Question 13

Which of the following equations best represents the relationship between total health care expenditure ($$E$$), price per unit of health care ($$P$$), and quantity of health care consumed ($$Q$$)?

Accepted Answer

$$ E = P 	imes Q $$

Question 14

Which of the following is a feature of the Canadian health care system?

Accepted Answer

The government provides health insurance to all residents, but private companies provide the care.

Question 15

Which of the following best describes the 'cost disease' in the health care sector?

Accepted Answer

Health care providers have slower productivity growth than other sectors, but wages still rise, increasing costs.

Question 16

Which of the following is a likely effect of removing the tax preference for employer-provided health insurance?

Accepted Answer

Employees would prefer higher wages and pay a larger share of health costs out-of-pocket.

Question 17

Which of the following is a potential drawback of a 'Medicare for All' single-payer system, as discussed in the materials?

Accepted Answer

Reduced flexibility and potential for increased moral hazard.

Question 18

Which of the following best explains why comparing health care outcomes across countries can be misleading?

Accepted Answer

Differences in lifestyle choices and data collection methods can distort comparisons.

Question 19

Which of the following is an example of a policy designed to reduce moral hazard among patients in health insurance?

Accepted Answer

Introducing deductibles and coinsurance requirements.

Question 20

Suppose a country has a health care system where the government owns most hospitals and employs most doctors. Which system does this describe?

Accepted Answer

Socialized medicine

The Economics of Health Care: Microeconomics Study Notes

Study Guide - Practice Questions

Study Guide - Flashcards