Exam 1 – Healthcare Economics (MHA
710)|| GRADED A+|| LATEST UPDATE
2025/26
What is "economics"? -CORRECTANSWER A Map for decision making. Economics
analyzes the allocation of scarce resources.
What are some of the specific challenges faced by managers in healthcare? -
CORRECTANSWER 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? -
CORRECTANSWER 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, 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? -CORRECTANSWER 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? -CORRECTANSWER Demand for a good or service is
greater than the availability
What does it mean to say people are assumed to make choices rationally? -
CORRECTANSWER focuses on individuals' efforts to best realize their goals, given
their resources.
What does it mean to says resources are scarce? -CORRECTANSWER Anything
useful in consumption or production that has alternative uses.
What is opportunity cost? -CORRECTANSWER Potential loss from a missed
opportunity. Passing up the next best choice.
What does "marginal" refer to? -CORRECTANSWER The examination of the costs and
benefits through a small change in the production of goods
, What does efficiency refer to? -CORRECTANSWER 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? -
CORRECTANSWER 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? -CORRECTANSWER 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. -
CORRECTANSWER 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? -
CORRECTANSWER Products (goods and services are considered products) are
commonly both inputs and outputs. For example, a surgical tool is an input into a
surgery and an output of a surgical tool company. Similarly, the surgery itself can be
considered an output of the surgical team or an input into the health of the patient.
710)|| GRADED A+|| LATEST UPDATE
2025/26
What is "economics"? -CORRECTANSWER A Map for decision making. Economics
analyzes the allocation of scarce resources.
What are some of the specific challenges faced by managers in healthcare? -
CORRECTANSWER 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? -
CORRECTANSWER 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, 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? -CORRECTANSWER 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? -CORRECTANSWER Demand for a good or service is
greater than the availability
What does it mean to say people are assumed to make choices rationally? -
CORRECTANSWER focuses on individuals' efforts to best realize their goals, given
their resources.
What does it mean to says resources are scarce? -CORRECTANSWER Anything
useful in consumption or production that has alternative uses.
What is opportunity cost? -CORRECTANSWER Potential loss from a missed
opportunity. Passing up the next best choice.
What does "marginal" refer to? -CORRECTANSWER The examination of the costs and
benefits through a small change in the production of goods
, What does efficiency refer to? -CORRECTANSWER 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? -
CORRECTANSWER 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? -CORRECTANSWER 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. -
CORRECTANSWER 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? -
CORRECTANSWER Products (goods and services are considered products) are
commonly both inputs and outputs. For example, a surgical tool is an input into a
surgery and an output of a surgical tool company. Similarly, the surgery itself can be
considered an output of the surgical team or an input into the health of the patient.
