MHA 710 – Healthcare Economics – Exam 1 |
Newest Questions and ANSWERs Updated 2026
Complete Review 2026!!
1. A society faces many decisions, but a household does not. True or False.
A. True
B. False
ANSWER✔✨-: B. False
Rationale:
A. True: Incorrect. Both societies and households face economic decisions due to scarce resources.
B. False: Correct. Both societies and households face the fundamental economic problem of scarcity and
must make decisions about how to allocate limited resources among unlimited wants.
2. Public policies aimed at increasing the size of the economic pie also lead to a higher degree of
equality. True or False.
A. True
B. False
ANSWER✔✨-: B. False
Rationale:
A. True: Incorrect. Policies that increase efficiency (size of economic pie) often create trade-offs with
equality. There is typically a trade-off between efficiency and equality.
B. False: Correct. There is often a trade-off between efficiency and equality. Policies that increase the
size of the economy don't necessarily distribute benefits equally; some may even increase inequality.
3. You can stay home and study to do well on your exam or you can go to the movies with your friends,
but not both. This example illustrates:
A. Scarcity and tradeoffs
,B. Scarcity but not tradeoffs
C. Tradeoffs but not scarcity
D. Neither tradeoffs nor scarcity
ANSWER✔✨-: A. Scarcity and tradeoffs
Rationale:
A. Scarcity and tradeoffs: Correct. Time is scarce (you can't be in two places at once), and you face a
tradeoff between studying and going to the movies.
B. Scarcity but not tradeoffs: Incorrect. While scarcity is present, there is also a clear tradeoff between
the two activities.
C. Tradeoffs but not scarcity: Incorrect. Scarcity of time is what creates the tradeoff in this situation.
D. Neither tradeoffs nor scarcity: Incorrect. Both concepts are clearly illustrated in this example.
4. Your opportunity cost of going to a Maroon 5 concert during your Spring Break is:
A. Zero, because Maroon 5 is your favorite
B. The price of the concert ticket
C. The price of the concert ticket plus the cost of any beverages you buy at the concert
D. The price of the concert ticket, plus the cost of any beverages you buy at the concert, and the value of
your time
ANSWER✔✨-: D. The price of the concert ticket, plus the cost of any beverages you buy at the
concert, and the value of your time
Rationale:
A. Zero, because Maroon 5 is your favorite: Incorrect. Opportunity cost exists regardless of preference;
it's the value of the next best alternative foregone.
B. The price of the concert ticket: Incorrect. This is only part of the opportunity cost; it doesn't include
other costs or the value of time.
C. The price of the concert ticket plus the cost of any beverages: Incorrect. This still doesn't account for
the value of your time, which could be spent on other activities.
D. The price of the concert ticket, plus beverages, and value of time: Correct. Opportunity cost includes
all explicit costs (ticket, beverages) and implicit costs (value of time in next best alternative use).
5. Certain employees are eligible for unemployment compensation if they lose their jobs through no
fault of their own. If Jim, a factory worker, will receive compensation of half his regular pay for 52 weeks
while he looks for a job, then:
,A. The unemployment compensation most likely raises Jim's incentive to save while he is working.
Unemployment compensation most likely increases Jim's efforts to find a new job.
B. The unemployment compensation most likely raises Jim's incentive to save while he is working.
Unemployment compensation most likely decreases Jim's efforts to find a new job.
C. The unemployment compensation most likely lowers Jim's incentive to save while he is working.
Unemployment compensation most likely increases Jim's efforts to find a new job.
D. The unemployment compensation most likely lowers Jim's incentive to save while he is working.
Unemployment compensation most likely decreases Jim's efforts to find a new job.
ANSWER✔✨-: D. The unemployment compensation most likely lowers Jim's incentive to save while
he is working. Unemployment compensation most likely decreases Jim's efforts to find a new job.
Rationale:
A. Raises incentive to save; increases efforts: Incorrect. Unemployment insurance reduces the need to
save (safety net exists) and may reduce job search intensity.
B. Raises incentive to save; decreases efforts: Incorrect. While it may decrease job search efforts, it
typically lowers (not raises) the incentive to save since there's a safety net.
C. Lowers incentive to save; increases efforts: Incorrect. While it does lower the incentive to save, it
typically decreases (not increases) job search efforts due to reduced urgency.
D. Lowers incentive to save; decreases efforts: Correct. Unemployment compensation reduces the need
for precautionary savings and may reduce the urgency and intensity of job search efforts (moral hazard).
6. Micah has spent $30 for a taxi ride to attend a Colts game. When he arrives at the stadium, he
discovers that he left his ticket at home. He doesn't have time to return home to get it. He paid $60 for
his ticket, but can buy another one for $80. In deciding whether he should buy another ticket Micah
should compare the value he places on attending the game to:
A. $30
B. $80
C. $90
D. $170
ANSWER✔✨-: B. $80
Rationale:
A. $30: Incorrect. The $30 taxi fare is a sunk cost and should not factor into the decision.
B. $80: Correct. This is the marginal cost of attending the game now. The $60 original ticket and $30 taxi
are sunk costs. Only the additional $80 matters for the decision.
C. $90: Incorrect. This incorrectly adds the $30 taxi (sunk cost) to the $80 new ticket price.
, D. $170: Incorrect. This adds all costs together ($30 + $60 + $80), but the taxi and original ticket are sunk
costs that shouldn't affect the decision.
7. Trade between countries tends to:
A. Reduce specialization and make everyone better off
B. Reduce specialization and make everyone worse off
C. Raise specialization and make everyone better off
D. Raise specialization but make everyone worse off
ANSWER✔✨-: C. Raise specialization and make everyone better off
Rationale:
A. Reduce specialization; better off: Incorrect. Trade increases, not reduces, specialization based on
comparative advantage.
B. Reduce specialization; worse off: Incorrect. Trade increases specialization and generally makes
countries better off through gains from trade.
C. Raise specialization; better off: Correct. Trade allows countries to specialize according to comparative
advantage, leading to more efficient production and mutual gains from trade.
D. Raise specialization; worse off: Incorrect. While trade does raise specialization, it makes trading
partners better off, not worse off (though there may be distributional effects).
8. Which of the following is the primary determinant of the standard of living?
A. Labor unions
B. Productivity
C. The amount of labor
D. Competition from foreign countries
ANSWER✔✨-: B. Productivity
Rationale:
A. Labor unions: Incorrect. While unions can affect wage distribution, they are not the primary
determinant of overall standard of living.
B. Productivity: Correct. A country's standard of living depends primarily on its ability to produce goods
and services, measured by productivity (output per hour of work).
C. The amount of labor: Incorrect. The quantity of labor matters less than how productively that labor is
used.
D. Competition from foreign countries: Incorrect. While international competition affects specific
industries, productivity is the fundamental determinant of living standards.
Newest Questions and ANSWERs Updated 2026
Complete Review 2026!!
1. A society faces many decisions, but a household does not. True or False.
A. True
B. False
ANSWER✔✨-: B. False
Rationale:
A. True: Incorrect. Both societies and households face economic decisions due to scarce resources.
B. False: Correct. Both societies and households face the fundamental economic problem of scarcity and
must make decisions about how to allocate limited resources among unlimited wants.
2. Public policies aimed at increasing the size of the economic pie also lead to a higher degree of
equality. True or False.
A. True
B. False
ANSWER✔✨-: B. False
Rationale:
A. True: Incorrect. Policies that increase efficiency (size of economic pie) often create trade-offs with
equality. There is typically a trade-off between efficiency and equality.
B. False: Correct. There is often a trade-off between efficiency and equality. Policies that increase the
size of the economy don't necessarily distribute benefits equally; some may even increase inequality.
3. You can stay home and study to do well on your exam or you can go to the movies with your friends,
but not both. This example illustrates:
A. Scarcity and tradeoffs
,B. Scarcity but not tradeoffs
C. Tradeoffs but not scarcity
D. Neither tradeoffs nor scarcity
ANSWER✔✨-: A. Scarcity and tradeoffs
Rationale:
A. Scarcity and tradeoffs: Correct. Time is scarce (you can't be in two places at once), and you face a
tradeoff between studying and going to the movies.
B. Scarcity but not tradeoffs: Incorrect. While scarcity is present, there is also a clear tradeoff between
the two activities.
C. Tradeoffs but not scarcity: Incorrect. Scarcity of time is what creates the tradeoff in this situation.
D. Neither tradeoffs nor scarcity: Incorrect. Both concepts are clearly illustrated in this example.
4. Your opportunity cost of going to a Maroon 5 concert during your Spring Break is:
A. Zero, because Maroon 5 is your favorite
B. The price of the concert ticket
C. The price of the concert ticket plus the cost of any beverages you buy at the concert
D. The price of the concert ticket, plus the cost of any beverages you buy at the concert, and the value of
your time
ANSWER✔✨-: D. The price of the concert ticket, plus the cost of any beverages you buy at the
concert, and the value of your time
Rationale:
A. Zero, because Maroon 5 is your favorite: Incorrect. Opportunity cost exists regardless of preference;
it's the value of the next best alternative foregone.
B. The price of the concert ticket: Incorrect. This is only part of the opportunity cost; it doesn't include
other costs or the value of time.
C. The price of the concert ticket plus the cost of any beverages: Incorrect. This still doesn't account for
the value of your time, which could be spent on other activities.
D. The price of the concert ticket, plus beverages, and value of time: Correct. Opportunity cost includes
all explicit costs (ticket, beverages) and implicit costs (value of time in next best alternative use).
5. Certain employees are eligible for unemployment compensation if they lose their jobs through no
fault of their own. If Jim, a factory worker, will receive compensation of half his regular pay for 52 weeks
while he looks for a job, then:
,A. The unemployment compensation most likely raises Jim's incentive to save while he is working.
Unemployment compensation most likely increases Jim's efforts to find a new job.
B. The unemployment compensation most likely raises Jim's incentive to save while he is working.
Unemployment compensation most likely decreases Jim's efforts to find a new job.
C. The unemployment compensation most likely lowers Jim's incentive to save while he is working.
Unemployment compensation most likely increases Jim's efforts to find a new job.
D. The unemployment compensation most likely lowers Jim's incentive to save while he is working.
Unemployment compensation most likely decreases Jim's efforts to find a new job.
ANSWER✔✨-: D. The unemployment compensation most likely lowers Jim's incentive to save while
he is working. Unemployment compensation most likely decreases Jim's efforts to find a new job.
Rationale:
A. Raises incentive to save; increases efforts: Incorrect. Unemployment insurance reduces the need to
save (safety net exists) and may reduce job search intensity.
B. Raises incentive to save; decreases efforts: Incorrect. While it may decrease job search efforts, it
typically lowers (not raises) the incentive to save since there's a safety net.
C. Lowers incentive to save; increases efforts: Incorrect. While it does lower the incentive to save, it
typically decreases (not increases) job search efforts due to reduced urgency.
D. Lowers incentive to save; decreases efforts: Correct. Unemployment compensation reduces the need
for precautionary savings and may reduce the urgency and intensity of job search efforts (moral hazard).
6. Micah has spent $30 for a taxi ride to attend a Colts game. When he arrives at the stadium, he
discovers that he left his ticket at home. He doesn't have time to return home to get it. He paid $60 for
his ticket, but can buy another one for $80. In deciding whether he should buy another ticket Micah
should compare the value he places on attending the game to:
A. $30
B. $80
C. $90
D. $170
ANSWER✔✨-: B. $80
Rationale:
A. $30: Incorrect. The $30 taxi fare is a sunk cost and should not factor into the decision.
B. $80: Correct. This is the marginal cost of attending the game now. The $60 original ticket and $30 taxi
are sunk costs. Only the additional $80 matters for the decision.
C. $90: Incorrect. This incorrectly adds the $30 taxi (sunk cost) to the $80 new ticket price.
, D. $170: Incorrect. This adds all costs together ($30 + $60 + $80), but the taxi and original ticket are sunk
costs that shouldn't affect the decision.
7. Trade between countries tends to:
A. Reduce specialization and make everyone better off
B. Reduce specialization and make everyone worse off
C. Raise specialization and make everyone better off
D. Raise specialization but make everyone worse off
ANSWER✔✨-: C. Raise specialization and make everyone better off
Rationale:
A. Reduce specialization; better off: Incorrect. Trade increases, not reduces, specialization based on
comparative advantage.
B. Reduce specialization; worse off: Incorrect. Trade increases specialization and generally makes
countries better off through gains from trade.
C. Raise specialization; better off: Correct. Trade allows countries to specialize according to comparative
advantage, leading to more efficient production and mutual gains from trade.
D. Raise specialization; worse off: Incorrect. While trade does raise specialization, it makes trading
partners better off, not worse off (though there may be distributional effects).
8. Which of the following is the primary determinant of the standard of living?
A. Labor unions
B. Productivity
C. The amount of labor
D. Competition from foreign countries
ANSWER✔✨-: B. Productivity
Rationale:
A. Labor unions: Incorrect. While unions can affect wage distribution, they are not the primary
determinant of overall standard of living.
B. Productivity: Correct. A country's standard of living depends primarily on its ability to produce goods
and services, measured by productivity (output per hour of work).
C. The amount of labor: Incorrect. The quantity of labor matters less than how productively that labor is
used.
D. Competition from foreign countries: Incorrect. While international competition affects specific
industries, productivity is the fundamental determinant of living standards.
