MHA710 Exam 3 Actual Exam Style V1
MHA 710 Healthcare Economics |
Louisiana State University in Shreveport
1. Which of the following measures is used by the Department of Justice to evaluate market
concentration for potential mergers?
A. Gross Domestic Product
B. Medical Loss Ratio
C. Consumer Price Index
D. Herfindahl-Hirschman Index
Answer: D
Rationale: The Herfindahl-Hirschman Index (HHI) is calculated by squaring the market
share of each firm in a market and summing the results. It provides a numerical value that
represents the level of competition and concentration within a specific industry. Regulators
use this index to determine if a proposed merger will lead to a monopoly or significantly
reduce competition.
2. In the context of hospital production, what does ‘economies of scale’ refer to?
A. The ability to charge higher prices due to market power
B. Increasing output results in higher average costs per unit
C. Producing multiple types of services reduces total costs
,D. Increasing output results in lower average costs per unit
Answer: D
Rationale: Economies of scale occur when the long-run average total cost declines as the
quantity of output increases. This often happens because fixed costs, such as expensive
medical equipment, are spread over a larger number of patients. In healthcare, larger
hospital systems often leverage these economies to reduce administrative and operational
overhead.
3. What is the primary characteristic of a ‘monopsony’ in the healthcare labor market?
A. A single seller of medical services
B. Multiple firms competing for the same pool of nurses
C. A single buyer of labor, such as a large hospital in a small town
D. Government regulation of physician salaries
Answer: C
Rationale: A monopsony exists when there is only one major buyer of a specific type of
labor in a geographic area. This gives the employer significant power to set wages lower
than they would be in a competitive market. For instance, a single hospital in a rural county
often acts as a monopsonist for the local nursing workforce.
4. The ‘Medical Arms Race’ hypothesis suggests that hospitals compete by:
A. Lowering prices to attract uninsured patients
, B. Lobbying the government for higher Medicaid reimbursement
C. Reducing the number of specialized staff to save costs
D. Increasing quality and technology to attract physicians and patients
Answer: D
Rationale: The Medical Arms Race occurs when hospitals compete on the basis of
perceived quality rather than price. This leads hospitals to invest heavily in the latest
medical technologies and amenities to attract both doctors and high-income patients.
Economists argue that this form of competition can lead to higher overall healthcare costs
without proportional improvements in health outcomes.
5. Which economic evaluation method measures health outcomes in terms of ‘Quality-
Adjusted Life Years’ (QALYs)?
A. Cost-Benefit Analysis
B. Cost-Effectiveness Analysis
C. Cost-Utility Analysis
D. Cost-Minimization Analysis
Answer: C
Rationale: Cost-Utility Analysis (CUA) is a specific type of economic evaluation that
compares the costs of an intervention to its health outcomes. These outcomes are
measured using QALYs, which combine both the quantity and quality of life into a single
MHA 710 Healthcare Economics |
Louisiana State University in Shreveport
1. Which of the following measures is used by the Department of Justice to evaluate market
concentration for potential mergers?
A. Gross Domestic Product
B. Medical Loss Ratio
C. Consumer Price Index
D. Herfindahl-Hirschman Index
Answer: D
Rationale: The Herfindahl-Hirschman Index (HHI) is calculated by squaring the market
share of each firm in a market and summing the results. It provides a numerical value that
represents the level of competition and concentration within a specific industry. Regulators
use this index to determine if a proposed merger will lead to a monopoly or significantly
reduce competition.
2. In the context of hospital production, what does ‘economies of scale’ refer to?
A. The ability to charge higher prices due to market power
B. Increasing output results in higher average costs per unit
C. Producing multiple types of services reduces total costs
,D. Increasing output results in lower average costs per unit
Answer: D
Rationale: Economies of scale occur when the long-run average total cost declines as the
quantity of output increases. This often happens because fixed costs, such as expensive
medical equipment, are spread over a larger number of patients. In healthcare, larger
hospital systems often leverage these economies to reduce administrative and operational
overhead.
3. What is the primary characteristic of a ‘monopsony’ in the healthcare labor market?
A. A single seller of medical services
B. Multiple firms competing for the same pool of nurses
C. A single buyer of labor, such as a large hospital in a small town
D. Government regulation of physician salaries
Answer: C
Rationale: A monopsony exists when there is only one major buyer of a specific type of
labor in a geographic area. This gives the employer significant power to set wages lower
than they would be in a competitive market. For instance, a single hospital in a rural county
often acts as a monopsonist for the local nursing workforce.
4. The ‘Medical Arms Race’ hypothesis suggests that hospitals compete by:
A. Lowering prices to attract uninsured patients
, B. Lobbying the government for higher Medicaid reimbursement
C. Reducing the number of specialized staff to save costs
D. Increasing quality and technology to attract physicians and patients
Answer: D
Rationale: The Medical Arms Race occurs when hospitals compete on the basis of
perceived quality rather than price. This leads hospitals to invest heavily in the latest
medical technologies and amenities to attract both doctors and high-income patients.
Economists argue that this form of competition can lead to higher overall healthcare costs
without proportional improvements in health outcomes.
5. Which economic evaluation method measures health outcomes in terms of ‘Quality-
Adjusted Life Years’ (QALYs)?
A. Cost-Benefit Analysis
B. Cost-Effectiveness Analysis
C. Cost-Utility Analysis
D. Cost-Minimization Analysis
Answer: C
Rationale: Cost-Utility Analysis (CUA) is a specific type of economic evaluation that
compares the costs of an intervention to its health outcomes. These outcomes are
measured using QALYs, which combine both the quantity and quality of life into a single
