MHA 710 Exam 1 Questions and
Answers 100% Solved | Graded A+
What is "economics"? - ✔✔A Map for decision making. Economics analyzes the
allocation of scarce resources.
What are some of the specific challenges faced by managers in healthcare? -
✔✔1. The central roles of risk and uncertainty
2. The complexities created by insurance
3. The perils produced by information asymmetries
4. The problems posed by not-for-profit organizations
5. The rapid and confusing course of technical and institutional change
What does asymmetric information mean? Can you give an example? -
✔✔When one party in a transaction has less information than the other party.
For example, physicians and other healthcare providers usually understand
patients' medical options better than patients do. Unaware of their choices,
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,patients may accept recommendations for therapies that are not cost-effective
or, recognizing their vulnerability to physicians' self-serving advice, may resist
recommendations made in their best interest.
What is adverse selection? - ✔✔A situation that occurs when buyers have better
information than sellers. For example, high-risk consumers are willing to pay
more for insurance than low-risk consumers are. (Organizations that have
difficulty distinguishing high-risk from low-risk consumers are unlikely to be
profitable.)
What is the problem of scarcity? - ✔✔Demand for a good or service is greater
than the availability
What does it mean to say people are assumed to make choices rationally? -
✔✔focuses on individuals' efforts to best realize their goals, given their
resources.
What does it mean to says resources are scarce? - ✔✔Anything useful in
consumption or production that has alternative uses.
What is opportunity cost? - ✔✔Potential loss from a missed opportunity.
Passing up the next best choice.
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, What does "marginal" refer to? - ✔✔The examination of the costs and benefits
through a small change in the production of goods
What does efficiency refer to? - ✔✔No way to rearrange production of goods in
a way that makes one person more better off without making somebody else
worse off. How well an economy uses scare resources to meet the needs/wants
of their customers
How do positive economic statements differ from normative economic
statements? - ✔✔Positive economics is objective while normative economics is
subjective. Facts/ What is vs What should be
How can economics be applied to the health sector? - ✔✔Describe, Explain,
Evaluate, Plan
As we progress through the chapters, think about the special characteristics that
apply to the health sector that might limit the applicability of traditional
economic models. - ✔✔Social determinants of health, few insurance companies
that providers rely on, not a perfectly competitive market
How are healthcare products both outputs and inputs? Can you give an
example? - ✔✔Products (goods and services are considered products) are
commonly both inputs and outputs. For example, a surgical tool is an input into
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©KERRYMARTIN 2025/2026. YEAR PUBLISHED 2025.
Answers 100% Solved | Graded A+
What is "economics"? - ✔✔A Map for decision making. Economics analyzes the
allocation of scarce resources.
What are some of the specific challenges faced by managers in healthcare? -
✔✔1. The central roles of risk and uncertainty
2. The complexities created by insurance
3. The perils produced by information asymmetries
4. The problems posed by not-for-profit organizations
5. The rapid and confusing course of technical and institutional change
What does asymmetric information mean? Can you give an example? -
✔✔When one party in a transaction has less information than the other party.
For example, physicians and other healthcare providers usually understand
patients' medical options better than patients do. Unaware of their choices,
1|Page
©KERRYMARTIN 2025/2026. YEAR PUBLISHED 2025.
,patients may accept recommendations for therapies that are not cost-effective
or, recognizing their vulnerability to physicians' self-serving advice, may resist
recommendations made in their best interest.
What is adverse selection? - ✔✔A situation that occurs when buyers have better
information than sellers. For example, high-risk consumers are willing to pay
more for insurance than low-risk consumers are. (Organizations that have
difficulty distinguishing high-risk from low-risk consumers are unlikely to be
profitable.)
What is the problem of scarcity? - ✔✔Demand for a good or service is greater
than the availability
What does it mean to say people are assumed to make choices rationally? -
✔✔focuses on individuals' efforts to best realize their goals, given their
resources.
What does it mean to says resources are scarce? - ✔✔Anything useful in
consumption or production that has alternative uses.
What is opportunity cost? - ✔✔Potential loss from a missed opportunity.
Passing up the next best choice.
2|Page
©KERRYMARTIN 2025/2026. YEAR PUBLISHED 2025.
, What does "marginal" refer to? - ✔✔The examination of the costs and benefits
through a small change in the production of goods
What does efficiency refer to? - ✔✔No way to rearrange production of goods in
a way that makes one person more better off without making somebody else
worse off. How well an economy uses scare resources to meet the needs/wants
of their customers
How do positive economic statements differ from normative economic
statements? - ✔✔Positive economics is objective while normative economics is
subjective. Facts/ What is vs What should be
How can economics be applied to the health sector? - ✔✔Describe, Explain,
Evaluate, Plan
As we progress through the chapters, think about the special characteristics that
apply to the health sector that might limit the applicability of traditional
economic models. - ✔✔Social determinants of health, few insurance companies
that providers rely on, not a perfectly competitive market
How are healthcare products both outputs and inputs? Can you give an
example? - ✔✔Products (goods and services are considered products) are
commonly both inputs and outputs. For example, a surgical tool is an input into
3|Page
©KERRYMARTIN 2025/2026. YEAR PUBLISHED 2025.
