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ECO4050 Health Economics and Financing exam practice questions with 100% verified solutions graded A+
This document consist of final exam review questions on health finance and economics.
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ECO4050 HEALTH ECONOMICSEXAM REVIEW QUESTIONS
(SOLVED)
What is health economics? - Application of various micro-economic tools to health
issues and problems. Promotes a better understanding of health care problems so that
corrective health policies can be designed and proposed.
Health care resources - Medical supplies (latex gloves), Personnel (Physicians, lab
assistants), Capital inputs (hospitals),
How does economics apply to health care? - Uncertainty: Patient Status, are we healthy
or unhealthy? Do we need treatment? will it work?
Prominence of Insurance: over 76% of health care expenditures are paid by third party
payers.
Information: Physician acts as an agent for a patient because they know more about a
certain illness. Sometimes patients can hide illness from insurer which can lead to
breakdowns in the insurance markets.
Restrictions on competition: License requirements for providers, advertising
Production Possibilities Frontier - Shows the combinations of two goods the economy
can possibly produce given the available resources and the available technology
Opportunity Cost - Opportunity cost of an item is what must be given up to obtain that
item. Slope of PPF tells you the opportunity cost of one good in terms of the other.
Tradeoff - Getting more of one good requires sacrificing some of the other.
Shape of the PPF - If opp. cost is const. then PPF is a straight line. But if opp. cost of a
good rises as the economy produces more of the good, PPF is bow shaped. PPF is bow
shaped when different workers have different skills, different opportunity costs of
producing one good in terms of the other.
, Quantity Demanded - the amount of the good that buyers are willing and able to
purchase over a period of time holding all else constant
Law of Demand - As price of a good rises quantity demanded declines
Demand Curve and Demand Shifters - Income
Tastes
Prices of other goods
Insurance
quantity supplied - the amount that sellers are willing and able to sell
Law of Supply - the quantity supplied of a good rises when the price of the good rises,
other things equal
Supply Curve and Supply shifters - technological advance
price of good
environment
size of industry
Utility - The pleasure, satisfaction, or need fulfillment that people get from their
consumption
Marginal Utility - the extra utility achieved by consuming one more unit of a good
Diminishing marginal utility - marginal utility of a good falls as consumption of that good
increases.
Indifference Curve - A curve that shows all the combinations of goods and services that
provide the same level of utility.
Points above the indifference curve are preferred to those on it. Points below the
indifference curve are not preferred to those on it. Utility increases as we move to higher
indifference curves.
Budget Constraint - the limit that income places on the combinations of goods and
services that a person can buy
Elasticity - Measures how much of one variable responds to changes in another
variable.
Price elasticity of demand - Measures how much quantity demanded responds to a
change in P. Measures the price sensitivity of buyer's demand
Price elasticity of supply - Measures how much quantity supplied responds to a change
in P. Measures the seller's price sensitivity
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