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Why Health Economics?
Comprehension Questions
Indicate whether the statement is true or false and justify your answer. Be sure to cite evidence from
the chapter and state any additional assumptions you may need.
1. The health care economy is one of the largest sectors in most countries.
TRUE. Health care is a major part of the economy due to its significant expenditures and
employment rates.
2. People can always accurately predict their future health needs.
FALSE. Health is uncertain, and people cannot fully predict when they will need medical
care.
3. Infectious diseases spread from person to person, making health a public concern.
TRUE. Health is contagious, and diseases can spread, affecting the broader population.
4. Health economics only deals with private financial transactions between patients and doctors.
FALSE. Health economics also covers public finance, including government spending on
health care systems.
5. Public health care funding is the responsibility of individuals, not the government.
FALSE. In most countries, health economics involves significant public finance
contributions, especially in social health insurance systems.
,6. Welfare economics studies the allocation of resources to maximize individual well-being.
TRUE. Welfare economics examines how resources can be distributed to improve overall
societal welfare, which includes health care.
7. Health economics is only relevant for the United States due to its unique health care system.
FALSE. Health economics applies globally, although different countries may have varying
systems and challenges.
8. The chapter emphasizes that many health care systems outside the U.S. use private insurance
as the primary method of financing.
FALSE. Many non-American health systems rely on government-provided health insurance
or socialized models.
9. The unpredictability of health makes insurance markets a crucial part of health economics.
TRUE. Due to the uncertainty of health outcomes, insurance markets play a central role in
managing risk and costs.
10. Readers from other countries are encouraged to compare the U.S. system with their own
health care models to understand differences in public finance.
TRUE. The chapter highlights that non-American readers should consider how their
country's system contrasts with the U.S. model, especially regarding public finance.
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2
Demand for Health Care
Comprehension Questions
Indicate whether the statement is true or false, and justify your answer. Be sure
to cite evidence from the chapter and state any additional assumptions you may
need.
1. Unlike with most types of goods, deriving a demand curve for health care is
quite simple because people rarely skimp on health care.
FALSE. Just as with any good, deriving a demand curve for health care is dif-
ficult because it requires information about how the same population would
react to different prices. This requires either parallel universes or, more real-
istically, a randomized experiment.
2. The RAND study was especially useful for measuring price elasticities be-
cause it randomly assigned insurance plans to participants (as opposed to
letting them choose).
TRUE. Randomization ensured that the groups facing different prices were
statistically equivalent. That meant that any difference in demand between
groups was attributable to price, not some other characteristic.
3. The Oregon Medicaid Experiment is not truly “randomized” because lottery
winners did not all end up with insurance, and some lottery losers did end
up with insurance.
FALSE. Although the Oregon Medicaid Experiment was not exactly a con-
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