,MHA 710 - Healthcare Economics - Exam 1 {3
VERSIONS}
Complete Practice Questions
1. Which of the following best describes the "economic problem" in healthcare?
A) Ensuring everyone has access to the latest technology
B) Allocating scarce resources among unlimited wants and needs
C) Eliminating all out-of-pocket expenses for patients
D) Maximizing hospital profits above all else
Correct Answer: B) Allocating scarce resources among unlimited wants and needs
Rationale: The fundamental economic problem is scarcity—limited resources relative to
unlimited wants. Healthcare faces this in deciding how to allocate beds, staff, equipment,
and funds .
2. A physician recommends an expensive MRI for a patient with a simple
headache. This is an example of:
A) Supply-induced demand
B) Price elasticity
C) Economies of scale
D) Perfect competition
Correct Answer: A) Supply-induced demand
Rationale: Supply-induced demand occurs when providers recommend services that
patients would not have chosen if they had full information, often because the provider
benefits from providing more services .
,3. The term "moral hazard" in health insurance refers to:
A) Patients lying about their health status to obtain insurance
B) Insurance companies denying legitimate claims
C) Patients using more healthcare services because insurance lowers the out-of-pocket
cost
D) Providers refusing to treat uninsured patients
Correct Answer: C) Patients using more healthcare services because insurance
lowers the out-of-pocket cost
Rationale: Moral hazard occurs when insurance reduces the incentive to avoid risk or use
care efficiently, leading to increased utilization of services .
4. Which of the following is a valid measure of health outcomes in economic
evaluation?
A) Number of hospital beds
B) Quality-Adjusted Life Year (QALY)
C) Total healthcare expenditure
D) Number of physicians per capita
Correct Answer: B) Quality-Adjusted Life Year (QALY)
Rationale: QALYs are the standard measure of health outcomes in cost-utility analysis,
combining both quantity and quality of life .
5. A new drug costs $50,000 per QALY gained. If the standard willingness-to-pay
threshold is $100,000 per QALY, the drug is considered:
A) Not cost-effective
B) Cost-effective
C) Dominant
D) Inferior
Correct Answer: B) Cost-effective
, Rationale: If the cost per QALY is below the willingness-to-pay threshold, the intervention
is considered cost-effective .
6. What does a "dominant" strategy in game theory mean?
A) A strategy that always yields the highest payoff regardless of what others do
B) A strategy that yields the lowest possible payoff
C) A strategy that requires cooperation
D) A strategy only used in healthcare
Correct Answer: A) A strategy that always yields the highest payoff regardless of
what others do
Rationale: A dominant strategy is one that provides the best outcome for a player
regardless of the other player's choice .
7. The "free-rider problem" is most associated with:
A) Private goods
B) Public goods
C) Club goods
D) Common goods
Correct Answer: B) Public goods
Rationale: Public goods are non-excludable, meaning individuals can benefit without
paying (free-riding), leading to under-provision .
8. In the standard gamble method for measuring health utility, patients are asked
to:
A) Choose between two certain health states
B) Choose between a certain health state and a risky gamble with possible better or
VERSIONS}
Complete Practice Questions
1. Which of the following best describes the "economic problem" in healthcare?
A) Ensuring everyone has access to the latest technology
B) Allocating scarce resources among unlimited wants and needs
C) Eliminating all out-of-pocket expenses for patients
D) Maximizing hospital profits above all else
Correct Answer: B) Allocating scarce resources among unlimited wants and needs
Rationale: The fundamental economic problem is scarcity—limited resources relative to
unlimited wants. Healthcare faces this in deciding how to allocate beds, staff, equipment,
and funds .
2. A physician recommends an expensive MRI for a patient with a simple
headache. This is an example of:
A) Supply-induced demand
B) Price elasticity
C) Economies of scale
D) Perfect competition
Correct Answer: A) Supply-induced demand
Rationale: Supply-induced demand occurs when providers recommend services that
patients would not have chosen if they had full information, often because the provider
benefits from providing more services .
,3. The term "moral hazard" in health insurance refers to:
A) Patients lying about their health status to obtain insurance
B) Insurance companies denying legitimate claims
C) Patients using more healthcare services because insurance lowers the out-of-pocket
cost
D) Providers refusing to treat uninsured patients
Correct Answer: C) Patients using more healthcare services because insurance
lowers the out-of-pocket cost
Rationale: Moral hazard occurs when insurance reduces the incentive to avoid risk or use
care efficiently, leading to increased utilization of services .
4. Which of the following is a valid measure of health outcomes in economic
evaluation?
A) Number of hospital beds
B) Quality-Adjusted Life Year (QALY)
C) Total healthcare expenditure
D) Number of physicians per capita
Correct Answer: B) Quality-Adjusted Life Year (QALY)
Rationale: QALYs are the standard measure of health outcomes in cost-utility analysis,
combining both quantity and quality of life .
5. A new drug costs $50,000 per QALY gained. If the standard willingness-to-pay
threshold is $100,000 per QALY, the drug is considered:
A) Not cost-effective
B) Cost-effective
C) Dominant
D) Inferior
Correct Answer: B) Cost-effective
, Rationale: If the cost per QALY is below the willingness-to-pay threshold, the intervention
is considered cost-effective .
6. What does a "dominant" strategy in game theory mean?
A) A strategy that always yields the highest payoff regardless of what others do
B) A strategy that yields the lowest possible payoff
C) A strategy that requires cooperation
D) A strategy only used in healthcare
Correct Answer: A) A strategy that always yields the highest payoff regardless of
what others do
Rationale: A dominant strategy is one that provides the best outcome for a player
regardless of the other player's choice .
7. The "free-rider problem" is most associated with:
A) Private goods
B) Public goods
C) Club goods
D) Common goods
Correct Answer: B) Public goods
Rationale: Public goods are non-excludable, meaning individuals can benefit without
paying (free-riding), leading to under-provision .
8. In the standard gamble method for measuring health utility, patients are asked
to:
A) Choose between two certain health states
B) Choose between a certain health state and a risky gamble with possible better or
