HEALTH ECONOMICS AND
FINANCE EXAM REVIEW
QUESTIONS (100%SOLVED)
per capita - per person
GDP - -gross domestic product
-capture of everything we spend money on
-healthcare=19.7% of US GDP
System Issues - -revolve around cost, quality, and access
-iron triangle (Q want to go up, A want to go up, C want to go down)
-majority of consumers rate their health care as excellent or very good(those who said
not good were those with no health insurance and no regular health providers)
-US physicians less satisfied with career the more patients they have and bc profit
driven sys
utility - -usefulness(satisfies you)
-more of it=higher demand
-healthcare has utility to those who have access to it
-you tend to pursue it as long as you have resources, money, access, etc. to pursue it
Defining Health - -World Health Organization (WHO) defines as "a complete state of
physical, mental, and social well-being, and not merely the absence of illness or
disease."
-total employment in US healthcare=10 million
-6 in 10 adults in the U.S have a chronic disease
-4 in 10 adults in the U.S. have 2 or more chronic diseases
Population health - -health outcomes of a group of individuals, including the distribution
of such outcomes with
-for both individual and population level health status of US population is
mediocre(moderate quality)
Health economics - field of economics that analyzes behavior of consumers, producers,
financers, and the role of government in the healthcare economy.
, Supply and demand - -supply=availability of goods and services
-demand= amount of good and services consumed
-demand is increased when price is lowered
-supply is decreased when price is lower (don't have enough money to make more)
-in equilibrium, price converges where the quantity demanded by the consumer equals
the quantity supplied by the producer
Market Equilibrium - -aka Market Cleaning Condition
-point at which markets are able to efficiently allocate scare resources for the services in
question
-no surpluses or shortages of good or service in market
-optimization of equilibrium=MPC=MPB
Scarcity - addresses the problem of limited resources and the need to make choices,
given unlimited human wants
Market failure - -rises when the free market fails to promote efficient allocation of goods
and services
-"Failures" of the free market include natural monopoly, oligopoly, externalities of
production or consumption, public goods, and incomplete information
-opposite of optimization
Opitimization - -determination of best action given decision maker's goals and objectives
-ex:buying a car
Marginal Benefit - -the additional benefit received from consuming the next unit of the
good or service
-MPB(marginal private benefit)=reducing potential own loss
-benefit more than cost
-only consume things where marginal benefit is higher than marginal cost
-to maximize utility MPB=price of good or service
Marginal Cost - -the additional cost of consuming the next unit of a good or service
-MPC=additional cost of producing the next unit for the firm
-firm will produce up to the point where MPC=price of good or service
Jerry owns a candy store. The store's revenues depend on the number of hours the
store is open each day as shown in the Table below. The cost of staying open each
hour is $10. If Jerry follows the marginal principle, how many hours each day should he
keep his store open?
hours open, total revenue
0,$0
1,$25
2,$45
3,$60
4,$70
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