MHA710 Final Exam Actual Exam Style V2
| MHA 710 Healthcare Economics |
Louisiana State University in Shreveport
1. Which of the following best describes the concept of ‘moral hazard’ in healthcare?
A. The tendency for insurance companies to deny coverage to high-risk individuals.
B. The inability of physicians to provide quality care due to lack of resources.
C. The change in consumer behavior when they are insulated from the full cost of medical
services.
D. The risk that a patient will choose a lower-quality provider to save money.
Answer: C
Rationale: Moral hazard occurs when an individual’s behavior changes because they do
not bear the full cost of their actions. In healthcare, this often manifests as patients
consuming more medical services than they would if they were paying the full market
price. This phenomenon is a primary reason why insurance companies utilize cost-sharing
mechanisms like copayments and deductibles.
2. In the Grossman Model of health demand, health is viewed as which of the following?
A. Both a consumption good and a capital investment.
B. An exogenous factor that individuals cannot influence.
C. Purely a consumption good with no long-term value.
,D. A commodity that is only produced by medical professionals.
Answer: A
Rationale: The Grossman Model treats health as a durable capital stock that yields an
output of healthy time. It is a consumption good because it makes people feel better
directly, and an investment good because it increases the number of days available for
work and leisure. Individuals ‘produce’ health using inputs like medical care, diet, and
exercise over their lifetime.
3. What does ‘adverse selection’ refer to in the context of health insurance markets?
A. High-risk individuals being more likely to purchase insurance than low-risk individuals.
B. Insurers choosing only the healthiest patients to cover.
C. Doctors selecting the most expensive treatments to increase their income.
D. Patients choosing the cheapest insurance plan regardless of coverage quality.
Answer: A
Rationale: Adverse selection arises when there is asymmetric information between the
buyer and the seller of insurance. Individuals with higher known health risks are more
motivated to seek insurance, while healthy individuals may opt out if they perceive the
premiums as too high. This imbalance can lead to rising premiums and a potential collapse
of the insurance market, often called a death spiral.
, 4. Which economic term describes a situation where a physician influences a patient’s
demand for care to align with the physician’s interests?
A. Supplier-induced demand
B. Consumer sovereignty
C. Market equilibrium
D. Pareto efficiency
Answer: A
Rationale: Supplier-induced demand occurs because physicians often act as both the
diagnostician and the provider of treatment. Due to information asymmetry, patients rely
on physicians to tell them what care is necessary. If a physician uses this influence to
increase the volume of services for financial gain rather than medical necessity, it creates
an inefficiency in the healthcare market.
5. A Cost-Effectiveness Analysis (CEA) typically measures outcomes in terms of:
A. Natural units, such as life-years gained or infections averted.
B. Monetary value or profit margins.
C. Patient satisfaction scores only.
D. The total number of procedures performed by a hospital.
Answer: A
| MHA 710 Healthcare Economics |
Louisiana State University in Shreveport
1. Which of the following best describes the concept of ‘moral hazard’ in healthcare?
A. The tendency for insurance companies to deny coverage to high-risk individuals.
B. The inability of physicians to provide quality care due to lack of resources.
C. The change in consumer behavior when they are insulated from the full cost of medical
services.
D. The risk that a patient will choose a lower-quality provider to save money.
Answer: C
Rationale: Moral hazard occurs when an individual’s behavior changes because they do
not bear the full cost of their actions. In healthcare, this often manifests as patients
consuming more medical services than they would if they were paying the full market
price. This phenomenon is a primary reason why insurance companies utilize cost-sharing
mechanisms like copayments and deductibles.
2. In the Grossman Model of health demand, health is viewed as which of the following?
A. Both a consumption good and a capital investment.
B. An exogenous factor that individuals cannot influence.
C. Purely a consumption good with no long-term value.
,D. A commodity that is only produced by medical professionals.
Answer: A
Rationale: The Grossman Model treats health as a durable capital stock that yields an
output of healthy time. It is a consumption good because it makes people feel better
directly, and an investment good because it increases the number of days available for
work and leisure. Individuals ‘produce’ health using inputs like medical care, diet, and
exercise over their lifetime.
3. What does ‘adverse selection’ refer to in the context of health insurance markets?
A. High-risk individuals being more likely to purchase insurance than low-risk individuals.
B. Insurers choosing only the healthiest patients to cover.
C. Doctors selecting the most expensive treatments to increase their income.
D. Patients choosing the cheapest insurance plan regardless of coverage quality.
Answer: A
Rationale: Adverse selection arises when there is asymmetric information between the
buyer and the seller of insurance. Individuals with higher known health risks are more
motivated to seek insurance, while healthy individuals may opt out if they perceive the
premiums as too high. This imbalance can lead to rising premiums and a potential collapse
of the insurance market, often called a death spiral.
, 4. Which economic term describes a situation where a physician influences a patient’s
demand for care to align with the physician’s interests?
A. Supplier-induced demand
B. Consumer sovereignty
C. Market equilibrium
D. Pareto efficiency
Answer: A
Rationale: Supplier-induced demand occurs because physicians often act as both the
diagnostician and the provider of treatment. Due to information asymmetry, patients rely
on physicians to tell them what care is necessary. If a physician uses this influence to
increase the volume of services for financial gain rather than medical necessity, it creates
an inefficiency in the healthcare market.
5. A Cost-Effectiveness Analysis (CEA) typically measures outcomes in terms of:
A. Natural units, such as life-years gained or infections averted.
B. Monetary value or profit margins.
C. Patient satisfaction scores only.
D. The total number of procedures performed by a hospital.
Answer: A
