HSPM 412 Final Review Questions with Correct Answers| Latest Update Guaranteed Success
Perfectly competitive markets are efficient because of:
A. Lack of information on both demand and supply sides
B. Private property rights or ownership
C. Heavy government intervention
D. Market power of large sellers B
(T/F) The efficiency of competitive markets means that only the perfectly competitive markets
come with the maximum total surplus (total surplus = producer's surplus + consumer's surplus).
True
Assume that the government relaxes the rules regarding the practice of foreign-trained
physicians in the U.S. medical care markets. Which of the following shows the effects of the
relaxation of the rules on the markets for physicians' services in the U.S., holding everything
else constant?
A. Exit > Higher Price > Higher profits or earnings
B. Exit > Lower Prices > Lower profits or earnings
C. Entry > Higher Prices > Lower profits or earnings
D. Entry > Lower Prices > Lower profits or earnings D
Which of the following is among the characteristics of the U.S. medical care markets?
A. Easy entry, easy exit
B. Perfect information on both supply and demand side
C. Highly mobile resources
D. Price taker hospitals, clinics, labs and pharmaceutical companies
E. none of the above E
HiState Dental Association (HDA) is an association of dentists formed to advance the interests
of dentists in HiState. Assume that HDA lobbies on the politicians and achieves them to pass a
,law to set the price of dental cleaning, a preventive dental service, at a price above the
equilibrium price of dental cleaning. What will be the results of government's setting the price
of dental cleaning above the equilibrium price?
A. Neither surplus nor shortage
B. Shortage
C. Surplus
D. No change in price C
Regarding medical markets, the idea of "invisible hand" of Adam Smith means:
A. Heavy government intervention
B. Free markets
C. Supply and demand mechanism
D. Competitive markets
E. All of the above except (A) E
Assume that the members of the PruLife Association, an association that is founded for
lowering the costs of having babies, lobby the government and had them set the price of
normal delivery way below its equilibrium price. How will this move of the government affect
the market for normal delivery services?
A. Price of normal delivery services won't change
B. There will be a surplus of normal delivery facilities and services
C. There will be a shortage of normal delivery facilities and services
D. Hospitals will lower the quality of normal delivery services
E. Only (C) and (D) are correct E
(T/F) Excise taxes and any deviation from perfectly competitive market structure will create
welfare losses (ignore elasticity of demand for answering this question). True
, (T/F) One of the reasons for high health expenditure share in the U.S. Gross Domestic Product
(GDP) is the lack of competition in U.S. medical care markets. True
Assume that cigarettes market in the U.S. is in equilibrium with $2.50 price per pack of cigarette
and 10 million packs sold and bought per day at $2.50. Assume that the government imposes a
$2 per pack excise tax on cigarettes. What will happen to the equilibrium price and market
quantity of cigarettes, holding everything else constant?
A. Price will go down, market quantity will go up
B. Price will go down, market quantity will go down C. Price will go up, market quantity will go
up
D. Price will go up, market quantity will go down E. no change in price and market quantity
D
If an excise tax is imposed on alcoholic drinks markets in the U.S., the supply curve for alcoholic
drinks will:
A. shift to the right
B. shift to the left
C. shift neither to the left nor right
D. none of the above B
(T/F) The high costs of medical care services in the U.S. can be reduced easily by
administratively forcing hospitals, clinics, labs, and pharmaceutical companies to charge lower
prices with no adverse effects in medical markets and no losses on the economy. False
While sneezing can have health benefits for a person, it can help spread diseases such as the
flu, which is the most common disease in the U.S. However, covering up the mouth during
sneezing is known to reduce the spread of diseases. Assume that there is no government
intervention programs on covering up the mouth during sneezing. Even though some will cover
up their mouth on their own for "being a good citizen", the level of mouth cover ups during
sneezing will be:
A. more than socially optimal
B. less than socially optimal
Perfectly competitive markets are efficient because of:
A. Lack of information on both demand and supply sides
B. Private property rights or ownership
C. Heavy government intervention
D. Market power of large sellers B
(T/F) The efficiency of competitive markets means that only the perfectly competitive markets
come with the maximum total surplus (total surplus = producer's surplus + consumer's surplus).
True
Assume that the government relaxes the rules regarding the practice of foreign-trained
physicians in the U.S. medical care markets. Which of the following shows the effects of the
relaxation of the rules on the markets for physicians' services in the U.S., holding everything
else constant?
A. Exit > Higher Price > Higher profits or earnings
B. Exit > Lower Prices > Lower profits or earnings
C. Entry > Higher Prices > Lower profits or earnings
D. Entry > Lower Prices > Lower profits or earnings D
Which of the following is among the characteristics of the U.S. medical care markets?
A. Easy entry, easy exit
B. Perfect information on both supply and demand side
C. Highly mobile resources
D. Price taker hospitals, clinics, labs and pharmaceutical companies
E. none of the above E
HiState Dental Association (HDA) is an association of dentists formed to advance the interests
of dentists in HiState. Assume that HDA lobbies on the politicians and achieves them to pass a
,law to set the price of dental cleaning, a preventive dental service, at a price above the
equilibrium price of dental cleaning. What will be the results of government's setting the price
of dental cleaning above the equilibrium price?
A. Neither surplus nor shortage
B. Shortage
C. Surplus
D. No change in price C
Regarding medical markets, the idea of "invisible hand" of Adam Smith means:
A. Heavy government intervention
B. Free markets
C. Supply and demand mechanism
D. Competitive markets
E. All of the above except (A) E
Assume that the members of the PruLife Association, an association that is founded for
lowering the costs of having babies, lobby the government and had them set the price of
normal delivery way below its equilibrium price. How will this move of the government affect
the market for normal delivery services?
A. Price of normal delivery services won't change
B. There will be a surplus of normal delivery facilities and services
C. There will be a shortage of normal delivery facilities and services
D. Hospitals will lower the quality of normal delivery services
E. Only (C) and (D) are correct E
(T/F) Excise taxes and any deviation from perfectly competitive market structure will create
welfare losses (ignore elasticity of demand for answering this question). True
, (T/F) One of the reasons for high health expenditure share in the U.S. Gross Domestic Product
(GDP) is the lack of competition in U.S. medical care markets. True
Assume that cigarettes market in the U.S. is in equilibrium with $2.50 price per pack of cigarette
and 10 million packs sold and bought per day at $2.50. Assume that the government imposes a
$2 per pack excise tax on cigarettes. What will happen to the equilibrium price and market
quantity of cigarettes, holding everything else constant?
A. Price will go down, market quantity will go up
B. Price will go down, market quantity will go down C. Price will go up, market quantity will go
up
D. Price will go up, market quantity will go down E. no change in price and market quantity
D
If an excise tax is imposed on alcoholic drinks markets in the U.S., the supply curve for alcoholic
drinks will:
A. shift to the right
B. shift to the left
C. shift neither to the left nor right
D. none of the above B
(T/F) The high costs of medical care services in the U.S. can be reduced easily by
administratively forcing hospitals, clinics, labs, and pharmaceutical companies to charge lower
prices with no adverse effects in medical markets and no losses on the economy. False
While sneezing can have health benefits for a person, it can help spread diseases such as the
flu, which is the most common disease in the U.S. However, covering up the mouth during
sneezing is known to reduce the spread of diseases. Assume that there is no government
intervention programs on covering up the mouth during sneezing. Even though some will cover
up their mouth on their own for "being a good citizen", the level of mouth cover ups during
sneezing will be:
A. more than socially optimal
B. less than socially optimal
