ECON-6370 exam 1 2018 100% graded solution

Question # 00587342
Subject: Economics
Due on: 03/05/2018
Posted On: 03/05/2018 01:02 PM
Tutorials: 1
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Question 1

Suppose a demand curve has the form X = 20 - 2P. What is the quantity consumed at P = 2? What is the price elasticity of demand at P=2? Round your answer to two decimal places.

Question 2

Suppose Julio has uncertainties in his income where the probability of being sick is 0.3, the probability of being healthy is 0.7, income when sick is 2,000, and income when healthy is 4,500. Also, let Julio's utility function be U(Income) = 2*Income. What is Julio's expected income? What is Julio's expected utility?

Question 3

In an attempt to cut costs, the largest employer in the area increases the coinsurance rate for employee health coverage from 10 percent to 20 percent. As a result

Answers:

A.

the demand curve for medical care rotates downward pivoting off the point where the curve crosses the horizontal axis.

B.

the demand curve for medical care rotates upward pivoting off the point where the curve crosses the horizontal axis.

C.

the demand curve for medical care shifts to the left.

D.

the demand curve for medical care shifts to the right.

Question 4

The Oregon Medicaid study's primary finding is that

Answers:

A.

usage increased, and there were significant gains in health.

B.

health increased, but usage rates remained stable.

C.

usage increased, but there was little to no effect on health.

D.

health declined and there was an increase in usage.

Question 5

2 out of 2 points

A negative cross price elasticity of demand for generic bandaids and neosporin would indicate that the two goods are _______.

Answers:

A.

complements

B.

normal

C.

substitutes

D.

inferior

Question 6

What are two serious cons of using observational data?

Answers:

A.

the data are relatively expensive to collect and are also potentially subject to adverse selection

B.

the data are relatively expensive to collect and are not random

C.

there are no cons to using observational data

D.

the data are not random and are also potentially subject to adverse selection

Question 7

The overall empirical finding for health insurance and health shows

Answers:

A.

that health insurance causes improvements in health while health does not cause improvements in health insurance.

B.

a positive relationship between the two.

C.

a negative relationship between the two.

D.

an inconclusive relationship between the two.

Question 8

Which of the following is NOT a determinant of demand for medical care?

Answers:

A.

number of medical care providers

B.

genetic makeup

C.

lifestyle choices

D.

educational attainment

Question 9

Another name for fixed dollar subsidy is

Answers:

A.

ad valorem

B.

indemnity

C.

coinsurance

D.

deductible

Question 10

Suppose consumers go from having no insurance to holding insurance with an ad valorem subsidy. As a result, the demand curve for medical care

Answers:

A.

none of the other answers

B.

remains unchanged

C.

rotates inward

D.

rotates outward

Question 11

Imagine you are giving the two data points (2,5) and (1,10) as quantity, price points on a demand curve. What is the arc elasticity?

Answers:

A.

-1/2

B.

-3/4

C.

-1

D.

0

Question 12

The 2008 Oregon Medicaid study is a great example of (a) _______________ .

Answers:

A.

observational data

B.

natural experiment

C.

government program that definitively improved health for the participants

D.

randomized control trial

Question 13

Which of the following is NOT a research issue addressed by the HIE?

Answers:

A.

How does cost sharing affect demand for medical care?

B.

How does a change from fee-for-service payment to capitation payment affect demand for medical care?

C.

Does use of medical care improve health?

D.

How does a change in the underwriting process laws affect the demand for medical care?

Question 14

Suppose that medical price inflation increases in the Grossman model. What happens to the cost of capital capital and the optimal stock of health?

Answers:

A.

the cost of capital increases and the optimal stock of health decreases

B.

the cost of capital declines and the optimal stock of health increases

C.

the cost of capital increases and the optimal stock of health increases

D.

the cost of capital declines and the optimal stock of health decreases

Question 15

A self control problem is associated with _________________ preferences.

Answers:

A.

time inconsistent

B.

myopic

C.

rational

D.

backward-looking

Question 16

A parent's health history and an individual's closeness to negative consequences of an unhealthy behavior change can impact ______________ over time, which can change decision making.

Answers:

A.

probabilities

B.

flows

C.

health

D.

none of the other answers

Question 17

______________ is a great example of exchanging a short term cost for a long term gain.

Answers:

A.

Drinking excessively

B.

Smoking

C.

Exercise

D.

There is not enough information to answer this question

Question 18

Household production functions were pioneered by ______________ and used by _______________ to describe the production of health.

Answers:

A.

Adam Smith; David Ricardo

B.

Frank Sloan; Chee-Ruey Hsieh

C.

Jimmy Fallon; Justin Timberlake

D.

Gary Becker; Michael Grossman

Question 19

2 out of 2 points

Why are mortality measures disadvantaged for measuring health capital?

Answers:

A.

systemic errors occur naturally when measuring mortality

B.

they do not measure mortality accurately enough

C.

none of the other answers

D.

they do not account for quality of life

Question 20

Given that a person purchases cigarettes, a change in the number of cigarettes smoked is an example of a(n) ______________.

Answers:

A.

effective demand

B.

nominal demand

C.

intensive margin

D.

extensive margin

Question 21

Discounting involves _______ by image to obtain the _______ . (Note that r can also be represented with i.)

Answers:

A.

dividing a fixed sum; present value

B.

multiplying the past sum; willingness to pay of net benefits

C.

dividing the past sum; willingness to pay of net benefits

D.

multiplying a fixed sum; present value

Question 22

What field of economics challenges the standard economic approach?

Answers:

A.

industrial organization

B.

labor

C.

health

D.

behavioral

Question 23

Bounded rationality is

Answers:

A.

when people view losses different than gains.

B.

when emotions play a significant role in decision making.

C.

when people have a tendency to take a smaller reward now vs. a larger reward later as now and later get closer and closer together in time.

D.

when people may not be able to evaluate pros and cons of alternative options because of cognitive limitations.

Question 24

Suppose that educational attainment increases in the Grossman model because an individual goes to graduate school and earns a MBA with a health care concentration. What happens to the cost of capital capital and the optimal stock of health?

Answers:

A.

the cost of capital remains stable and the optimal health stock increases

B.

the cost of capital decreases and the optimal health stock remains stable

C.

the cost of capital increases and the optimal health stock decreases

D.

the cost of capital and optimal health stock changes are ambiguous

Question 25

Preferred risk selection is associated with

Answers:

A.

exogenous shocks.

B.

cream skimming.

C.

job locking.

D.

single-payer insurance.

Question 26

2 out of 2 points

The gain from insurance _____ as the probability of getting sick approaches _____.

Answers:

A.

increases; 0

B.

increases; 1

C.

decreases; either 0 or 1

D.

remains unchanged; 1

Question 27

To what does moral hazard refer?

Answers:

A.

A situation in which consumers are encouraged to exercise more

B.

A situation in which you go have a snack

C.

A situation in which consumers alter their behavior when provided with health insurance

D.

A situation in which producers alter their behavior because of a monetary incentive

Question 28

2 out of 2 points

Which of the following is an example of the moral hazard problem?

Answers:

A.

A consumer drives a car more carefully after acquiring car insurance.

B.

A consumer exercises more after obtaining a long term disability insurance policy.

C.

A consumer visits a doctor more frequently after acquiring health insurance.

D.

A consumer eats healthier.

Question 29

_______ is a public insurance program intended to cover economically disadvantaged individuals.

Answers:

A.

Medicaid

B.

Medicare

C.

Blue Cross

D.

Medigap

Question 30

Adverse selection in insurance markets typically occurs when:

Answers:

A.

employees choose to self-insure.

B.

insurers have better information on the consumers' health than do consumers.

C.

consumers have better information on their health than do insurers.

D.

employers insist on a single plan for all clients.

Question 31

Let loading equal 1.4, coinsurance equal 0.5, the price of medical care equal $40, and the number of units of medical care equal 500. How much should the health insurance premium cost?

Answers:

A.

14,000

B.

24,000

C.

12,000

D.

600

Question 32

Insurance premiums determined by a(n) _______ are based on various identifiable characteristics such as health history that place individuals or groups into different risk categories.

Answers:

A.

community rating

B.

group model

C.

staff model

D.

experience rating

Question 33

Consider the expected utility and maximum willingness-to-pay to avoid expected loss model with a risk averse individual. What happens if the utility of wealth pivots downward?

Answers:

A.

The individual is willing to pay a smaller premium over the expected loss to obtain insurance.

B.

The individual is willing to pay a larger premium over the expected loss to obtain insurance.

C.

There is not enough information to answer this question.

D.

The individual's willing to pay a premium over the expected loss to obtain insurance is unchanged.

Question 34

Assume a Rothschild and Stiglitz (1976) scenario with two people and two insurance policy options. What happens to the premium differential as a result of the scenario?

Answers:

a.

it depends on whether the two people survive illnesses in the plan year

b.

it depends on the role moral hazard plays

c.

it contracts

d.

it increases

Question 35

What is a loading factor?

Answers:

A.

It is the different between the total assets and medical liabilities. It can also be thought of as the opportunity cost of insurance.

B.

It is a term about stuff and things.

C.

It is the difference between the total premium and actuarially fair premium. It can also be thought of as the price of insurance.

D.

It is the different between the total liabilities and medical assets. It can also be thought of as the opportunity cost of insurance.

Question 36

Which of the following is a positive statement?

Answers:

A.

You should exercise 3-5 times a week to perform at your best.

B.

We ought to raise taxes to pay for more "free" medical care.

C.

I believe the health economy looks good in the next quarter.

D.

As the price falls, the quantity demanded of health care will rise, all else held constant.

Question 37

Graphically, the relationship between GDP per capita and life expectancy at birth in the world is

Answers:

A.

conniving.

B.

conventional.

C.

convex.

D.

concave.

Question 38

Which of the following is a possible definition of GDP per capita?

Answers:

A.

The per person market value of all final goods and services produced within a country during a given period of time.

B.

The modal income of all residents in a country during a given period of time.

C.

The per person market value of all income earned by native born citizens of a country during a given period of time.

D.

The median income of a citizen in a country during a given period of time.

Question 39

Equity is concerned with

how society purposefully uses its resources to maximize welfare.

Answers:

how fairly economic resources are distributed.

how society purposefully uses its resources to maximize welfare.

justice and peace within countries.

ensuring the greatest good for the right people.

Question 40

Compared to the U.K., in the past 50 years, total expenditures on health care as a percent of GDP

Answers:

A.

has grown at approximately the same rate in the U.S.

B.

none of the other answers.

C.

has grown considerably more in the U.S.

D.

has grown and, overall, shrunk in the U.S.

Question 41

Which of the following best describes technical efficiency?

Answers:

A.

Increasing the amount of hospital beds available such that each person in the population served has a bed allocated to him/her.

B.

Consuming a medical service at the point where the marginal benefit exceeds the price.

C.

Constructing a new medical facility with the lowest possible combination of inputs.

D.

Eating Cheetos until you cannot eat any more

Question 42

Which of the following is an example of a normative statement?

Answers:

A.

We ought to provide accessible health care to everyone.

B.

Iran has a nuclear weapon.

C.

California is located west of Texas.

D.

The sky is blue.

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