This exam test is written to expose managers in practice, experts, professionals and students to the reality of applying the concepts of HEALTH ECONOMICS
HSC2391 HEALTH ECONOMICS EXAM 1 PRACTICE
QUESTIONS
Economics is the study of the allocation of ___ to satisfy ___. - limited resources; unlimited wants
Which of the following statements about indifference curves is (are) false?
a.) a set of indifference curves shows the maximum possible output combinations of two goods or
services an economy can achieve when all resources are fully and efficiently employed
b.) when comparing bundles of goods that lie on the same indifference curve we say the consumer has
no preference for one over another
c.) Typical indifference curves are downward sloping and bowed toward the origin
d.) a set of indifference curves can be used to summarize and represent consumer preferences - a set of
indifference curves shows the maximum possible output combinations of two goods or services an
economy can achieve when all resources
What does the production possibilites frontier (PPF) show? - the maximum possible output
combinations of two goods or services an economy can achieve when all resources are fully and
efficiently employed
What are indifference curves? - represent consumer preferences, which connects every possible
combination of goods that give the consumer the same amount of satisfaction
Based on a PPF and indifference curves, how do you see the optimal combination of goods? - When PPF
is tangent to (touching but not intersection) one of his indifference curves
The economics of health and health care is different from the economics at work in other, smaller
markets because? - health insurance is ubiquitous (very common), the demand for health care is highly
uncertain, and health is contagious
___ represents the behavior of buyers whereas ___ represents the behavior of sellers. - demand; supply
Summers in Columbia are HOT. During a heat wave, we except that the demand for lemonade will ___. -
increase (the demand curve will shift outward)
Peanut butter and Jelly are typically consumer ___ and as such are thought of as ___ goods - together;
complement
A peanut shortage causes the price of peanuts- along with the price of peanut butter- to increase by
40%. As a result, we expect demand for jelly to ___. - decrease (the demand curve will shift inward)
Producer surplus is the difference between a seller's cost to produce a good and the amount a seller is
actually paid for it (market price) and is represented by the area___ - above the supply curve and below
market price
, When the price of tomatoes decreases by 10%, the quantity demanded of fresh tomatoes increases by
46%. Calculate the price elasticity of demand for tomatoes. - -4.6
The market for lemonade is initially in equilibrium. Temperatures soar during the month of July. All else
equal, how does the heat wave affect the equilibrium price and quantity of lemonade? - both
equilibrium price and equilibrium quantity will increase
The market for lemonade is initially in equilibrium. Temperatures soar during the month of July. At the
same time, Harris Teeter runs a promotion on lemons, lowering the price from $1.79 to %0.99/lb. How
will the changing market conditions affect the equilibrium quantity of lemonade? - equilibrium quantity
will increase
The market for lemonade is initially in equilibrium. Temperatures soar during the month of July. At the
same time, Harris Teeter runs a promotion on lemons, lowering the price from $1.79 to %0.99/lb. How
will the changing market conditions affect the equilibrium PRICE of lemonade?
a) the change in equilibrium price is ambiguous (we dont have enough information to be certain)
b) equilibrium price will decrease
c) equilibrium price will increase
d) there will be no change to equilibrium price - the change in equilibrium price is ambiguous (we dont
have enough information to be certain)
The price elasticity of demand is related to the slope of? - the demand curve
When demand for a good is more elastic (price sensitive), the demand curve will be more
a)vertical
b) horizontal - horizontal
When demand for a good is more inelastic (price insensitive), the demand curve will be more
a) vertical
b) horizontal - vertical
We expect the demand for preventive care (like the flu vaccine) to be ___ than the demand for
emergency room care. - more elastic (more price sensitive)
Assume that the demand for MRI scans is less elastic than the demand for Band-aids. What would the
demand curve for MRI and band aids looks like? - demand curve for MRI scans would be more vertical
than the demand curve for band aids.
What is the midpoint method formula for price elasticity of demand? - e= (Q2-Q1)/(Q2+Q1)/
(P2-P1)/(P2+P1)
The RAND HIT finds that higher co-insurance rates lead to lower levels of both effective and ineffective
medial utilization. T/F - true
The Oregon Medicaid study is an example of a natural experiment. T/F - false; example of randomized
experiment (lottery used to randomly assign individuals into groups
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