MHA710 Exam 1 Actual Exam Style V3 |
MHA 710 Healthcare Economics |
Louisiana State University in Shreveport
1. Which economic concept describes the situation where resources are limited but human
wants are unlimited?
A. Equilibrium
B. Surplus
C. Scarcity
D. Elasticity
Answer: C
Rationale: Scarcity is the fundamental economic problem of having seemingly unlimited
human wants in a world of limited resources. It requires individuals and societies to make
choices about how to allocate resources efficiently. In healthcare, this translates to deciding
which treatments or populations receive funding when budgets are finite.
2. In the Grossman model, how is health viewed by an individual?
A. Only as a consumption good
B. Only as an investment good
C. As both a consumption and investment good
D. As a purely random occurrence
,Answer: C
Rationale: The Grossman model posits that health is a capital good that provides utility
directly and increases the amount of available productive time. As a consumption good, it
makes a person feel better, while as an investment good, it reduces time lost to illness. This
dual nature explains why individuals invest in health through exercise, diet, and medical
care.
3. Which of the following describes the ‘Medical Arms Race’ in hospital competition?
A. Hospitals competing on price to lower costs for patients
B. Hospitals competing by acquiring expensive technology to attract physicians and
patients
C. Hospitals merging to reduce the number of beds available
D. Government intervention to regulate pharmaceutical prices
Answer: B
Rationale: The Medical Arms Race hypothesis suggests that hospitals in competitive
markets compete for patients and doctors by offering the latest high-tech equipment and
amenities. This behavior often leads to redundant services and higher overall healthcare
costs without necessarily improving population health outcomes. It contrasts with
standard economic models where competition usually drives prices down.
, 4. What happens to the demand for a specific medical service if its price elasticity of demand
is -0.2?
A. Demand is highly elastic, and quantity drops significantly with a price increase
B. Demand is perfectly elastic
C. Demand is unit elastic
D. Demand is relatively inelastic, meaning quantity changes very little when price changes
Answer: D
Rationale: An elasticity coefficient of -0.2 indicates that the service is price inelastic
because the absolute value is less than 1. This means that if the price increases by 10%, the
quantity demanded will only decrease by 2%. Many life-saving medical treatments exhibit
this characteristic because patients have few alternatives and prioritize survival over cost.
5. Which phenomenon occurs when individuals change their behavior because they have
insurance coverage?
A. Moral Hazard
B. Adverse Selection
C. Risk Aversion
D. Supply-Induced Demand
Answer: A
MHA 710 Healthcare Economics |
Louisiana State University in Shreveport
1. Which economic concept describes the situation where resources are limited but human
wants are unlimited?
A. Equilibrium
B. Surplus
C. Scarcity
D. Elasticity
Answer: C
Rationale: Scarcity is the fundamental economic problem of having seemingly unlimited
human wants in a world of limited resources. It requires individuals and societies to make
choices about how to allocate resources efficiently. In healthcare, this translates to deciding
which treatments or populations receive funding when budgets are finite.
2. In the Grossman model, how is health viewed by an individual?
A. Only as a consumption good
B. Only as an investment good
C. As both a consumption and investment good
D. As a purely random occurrence
,Answer: C
Rationale: The Grossman model posits that health is a capital good that provides utility
directly and increases the amount of available productive time. As a consumption good, it
makes a person feel better, while as an investment good, it reduces time lost to illness. This
dual nature explains why individuals invest in health through exercise, diet, and medical
care.
3. Which of the following describes the ‘Medical Arms Race’ in hospital competition?
A. Hospitals competing on price to lower costs for patients
B. Hospitals competing by acquiring expensive technology to attract physicians and
patients
C. Hospitals merging to reduce the number of beds available
D. Government intervention to regulate pharmaceutical prices
Answer: B
Rationale: The Medical Arms Race hypothesis suggests that hospitals in competitive
markets compete for patients and doctors by offering the latest high-tech equipment and
amenities. This behavior often leads to redundant services and higher overall healthcare
costs without necessarily improving population health outcomes. It contrasts with
standard economic models where competition usually drives prices down.
, 4. What happens to the demand for a specific medical service if its price elasticity of demand
is -0.2?
A. Demand is highly elastic, and quantity drops significantly with a price increase
B. Demand is perfectly elastic
C. Demand is unit elastic
D. Demand is relatively inelastic, meaning quantity changes very little when price changes
Answer: D
Rationale: An elasticity coefficient of -0.2 indicates that the service is price inelastic
because the absolute value is less than 1. This means that if the price increases by 10%, the
quantity demanded will only decrease by 2%. Many life-saving medical treatments exhibit
this characteristic because patients have few alternatives and prioritize survival over cost.
5. Which phenomenon occurs when individuals change their behavior because they have
insurance coverage?
A. Moral Hazard
B. Adverse Selection
C. Risk Aversion
D. Supply-Induced Demand
Answer: A
