MHA710 Exam 1 Actual Exam Style V2
MHA 710 Healthcare Economics |
Louisiana State University in Shreveport
1. Which economic concept best explains why healthcare resources must be allocated among
competing uses?
A. Scarcity
B. Equilibrium
C. Surplus
D. Inflation
Answer: A
Rationale: Scarcity is the fundamental economic problem where resources are limited but
human wants are virtually unlimited. This necessitates making choices about which
healthcare services to provide and which to forgo. In the context of healthcare economics,
scarcity requires that we prioritize treatments based on their value and effectiveness.
2. In the context of the Grossman model, how is health primarily viewed by individuals?
A. As a pure consumption good only
B. As a capital good that provides utility
C. As a liability to be managed
D. As a public good provided by the state
,Answer: B
Rationale: The Grossman model treats health as a durable capital good that produces
healthy time as an output. Individuals invest in health through medical care, exercise, and
diet to offset the natural rate of depreciation. This perspective allows economists to
analyze health as an investment that provides both consumption utility and productive
capacity.
3. The ‘Flat of the Curve’ medicine refers to a situation where:
A. Total health outcomes are decreasing
B. Health care costs are perfectly stable
C. Marginal health benefits of additional spending are zero
D. The demand curve for health care is perfectly horizontal
Answer: C
Rationale: Flat of the curve medicine occurs when additional medical spending or
interventions yield little to no additional health improvement. It represents a point of
diminishing returns where the marginal productivity of medical care is at its lowest. This
concept is critical for policy makers looking to reduce waste without harming patient
health outcomes.
4. Which of the following describes ‘Adverse Selection’ in health insurance markets?
A. Insurers choosing only healthy patients to cover
B. Patients using more services because they are insured
, C. Sick individuals being more likely to purchase insurance than healthy individuals
D. Doctors providing more care because they are paid per service
Answer: C
Rationale: Adverse selection occurs when there is asymmetric information between the
buyer and the insurer, leading high-risk individuals to be more likely to buy coverage.
Because the insurer cannot perfectly distinguish between high-risk and low-risk
individuals, premiums may rise, causing healthy people to drop out. This cycle can lead to a
‘death spiral’ where only the most expensive patients remain in the pool.
5. What was a primary finding of the RAND Health Insurance Experiment?
A. Health care demand is completely inelastic
B. Free care significantly improves health for all income levels
C. Higher cost-sharing reduces the use of healthcare services
D. Physicians always induce demand regardless of insurance
Answer: C
Rationale: The RAND Health Insurance Experiment was a landmark study that
demonstrated that as the cost-sharing (out-of-pocket price) increases, the utilization of
health services decreases. This proved that healthcare demand is price-sensitive and not
perfectly inelastic as previously thought. The study also found that for most people, the
reduction in care did not lead to significant negative health impacts.
MHA 710 Healthcare Economics |
Louisiana State University in Shreveport
1. Which economic concept best explains why healthcare resources must be allocated among
competing uses?
A. Scarcity
B. Equilibrium
C. Surplus
D. Inflation
Answer: A
Rationale: Scarcity is the fundamental economic problem where resources are limited but
human wants are virtually unlimited. This necessitates making choices about which
healthcare services to provide and which to forgo. In the context of healthcare economics,
scarcity requires that we prioritize treatments based on their value and effectiveness.
2. In the context of the Grossman model, how is health primarily viewed by individuals?
A. As a pure consumption good only
B. As a capital good that provides utility
C. As a liability to be managed
D. As a public good provided by the state
,Answer: B
Rationale: The Grossman model treats health as a durable capital good that produces
healthy time as an output. Individuals invest in health through medical care, exercise, and
diet to offset the natural rate of depreciation. This perspective allows economists to
analyze health as an investment that provides both consumption utility and productive
capacity.
3. The ‘Flat of the Curve’ medicine refers to a situation where:
A. Total health outcomes are decreasing
B. Health care costs are perfectly stable
C. Marginal health benefits of additional spending are zero
D. The demand curve for health care is perfectly horizontal
Answer: C
Rationale: Flat of the curve medicine occurs when additional medical spending or
interventions yield little to no additional health improvement. It represents a point of
diminishing returns where the marginal productivity of medical care is at its lowest. This
concept is critical for policy makers looking to reduce waste without harming patient
health outcomes.
4. Which of the following describes ‘Adverse Selection’ in health insurance markets?
A. Insurers choosing only healthy patients to cover
B. Patients using more services because they are insured
, C. Sick individuals being more likely to purchase insurance than healthy individuals
D. Doctors providing more care because they are paid per service
Answer: C
Rationale: Adverse selection occurs when there is asymmetric information between the
buyer and the insurer, leading high-risk individuals to be more likely to buy coverage.
Because the insurer cannot perfectly distinguish between high-risk and low-risk
individuals, premiums may rise, causing healthy people to drop out. This cycle can lead to a
‘death spiral’ where only the most expensive patients remain in the pool.
5. What was a primary finding of the RAND Health Insurance Experiment?
A. Health care demand is completely inelastic
B. Free care significantly improves health for all income levels
C. Higher cost-sharing reduces the use of healthcare services
D. Physicians always induce demand regardless of insurance
Answer: C
Rationale: The RAND Health Insurance Experiment was a landmark study that
demonstrated that as the cost-sharing (out-of-pocket price) increases, the utilization of
health services decreases. This proved that healthcare demand is price-sensitive and not
perfectly inelastic as previously thought. The study also found that for most people, the
reduction in care did not lead to significant negative health impacts.
