Question 1

Approximately what percentage of total health care spending goes toward hospital care?

Accepted Answer

Hospital care accounts for approximately one-third of total health care spending in the United States.

Question 2

Under which of the following circumstances is the principal-agent problem likely to be most serious.

Accepted Answer

The principal-agent problem is most serious when there is a significant information asymmetry and potential for conflict of interest. Surgeons (agents) have specialized knowledge and may recommend procedures that benefit them financially, while patients (principals) rely on their expertise without the ability to fully assess the necessity or risks of the procedures.

Question 3

The government agency that controls the development and availability of new medical discoveries, including pharmaceutical drugs is

Accepted Answer

The Food and Drug Administration (FDA) is the government agency responsible for regulating the development and availability of new medical discoveries, including pharmaceutical drugs.

Question 4

Prospective payment in the hospital sector

Accepted Answer

Prospective payment systems (PPS) in the hospital sector involve predetermined rates for services, which means hospitals keep any surplus if costs are below the payment and absorb losses if costs exceed the payment, thus changing the incentive structure.

Question 5

Nonexcludable and nonrival goods are known as

Accepted Answer

Public goods are nonexcludable and nonrival, meaning that it is impossible to exclude people from consuming the good and that one person's consumption of the good does not reduce the amount available for others.

Question 6

Which of the following might cause a market to produce a quantity that is less than optimal?

Accepted Answer

Market control by a monopolist can lead to a quantity that is less than optimal because a monopolist may restrict output to maximize profits, resulting in a deadweight loss and a quantity lower than what would be produced in a competitive market.

Question 7

What measures would likely lower infant mortality rates in the United States?

Accepted Answer

All the measures listed (A, B, C, and D) contribute to lowering infant mortality rates by improving maternal and infant health outcomes.

Question 8

A patient has a medical condition, but he doesn't know what it is. The physician he sees diagnoses his illness correctly. What term applies to this situation?

Accepted Answer

Asymmetric information occurs when one party (the physician) has more or better information than the other party (the patient) in a transaction or situation. In this case, the physician knows the diagnosis, while the patient does not.

Question 9

When a physician knows more about alternative treatments than her patients, we say that _______ exists.

Accepted Answer

Asymmetric information exists when one party, such as a physician, has more or better information than the other party, such as the patient, about a particular subject, in this case, alternative treatments.

Question 10

The optimal level of output may be defined as that level of output where

Accepted Answer

The optimal level of output is where the marginal benefit of the last unit equals its marginal cost, as this is the point where resources are most efficiently allocated.

Question 11

In which of the following countries would an increase in per capita income likely result in the most improvement to health status of the population? 2006 per capita incomes in PPP dollars shown in parentheses.)

Accepted Answer

An increase in per capita income is likely to have the most significant impact on health status in countries with lower initial income levels, as they have more room for improvement in healthcare access and quality. Among the options, Mexico has the lowest per capita income, suggesting that additional income could lead to substantial health improvements.

Question 12

Inoculation programs against certain diseases such as small pox, polio, and whooping cough create

Accepted Answer

Inoculation programs create positive externalities in consumption because they not only protect the individuals who receive the vaccines but also reduce the spread of diseases, benefiting others in the community.

Question 13

Which of the following would likely lead to the greatest improvement in health status of the population in the United States?

Accepted Answer

Improved lifestyles, including reductions in the use of tobacco, alcohol, and drugs, have a significant impact on health outcomes by reducing the incidence of chronic diseases and improving overall well-being.

Question 14

Which of the following results from providers having more information about treatment alternatives than their patients?

Accepted Answer

The principle-agent problem occurs when one party (the agent, in this case, the provider) has more information than the other party (the principal, in this case, the patient), leading to potential conflicts of interest or inefficiencies in decision-making.

Question 15

Approximately what percentage of total health care spending goes toward physicians' services?

Accepted Answer

Approximately one-fourth of total health care spending goes toward physicians' services.

Question 16

If a hospital is experiencing economies of scale,

Accepted Answer

Economies of scale occur when increasing production leads to lower average costs, which means the average cost curve is negatively sloped as output increases.

Question 17

The market for medical care relies primarily on:

Accepted Answer

The market for medical care primarily relies on not-for-profit providers, such as hospitals and clinics, which often focus on community health and reinvest profits into services rather than distributing them to owners or shareholders.

Quiz 3: Analyzing Medical Care Markets