EC 248 EXAM 2 QUESTIONS WITH 100%
CORRECT ANSWERS.
2 gov't options to improve social welfare in the presence of externalities
pigouvian tax/subsidy
coasian bargaining
two conditions of the coase theorem
1. property rights are well defined
2. transaction/bargaining costs are low
3 reasons why physicians are not perfect agents of care
1. overutilization of care
2. physician-induced demand/ defensive medicine
3. racial discrimination
3 types of hospital-physician relationships
1. "physician's workbench": not directly employed by hospital
2. direct employees
3. physician-owned hospitals
learning-by-doing hypothesis:
high volumes lead to good outcomes
selective-referral hypothesis:
good outcomes lead to higher volumes
3 other barriers to entry to the hospital industry other than limited competition
1. insurance: prices not transparent, moral hazard for insured patients
2. govt often sets prices
3. emergency nature of health care means that patients are unable to find the optimal facility
medical arms race hypothesis
, greater competition among hospitals for doctors can result in redundancy/overconsumption of
medical technologies that will result in increased costs without an improvement in quality
pros and cons of being a nonprofit hospital
pros: exempt from taxes, donors recieve a tax deduction
cons: cannot sell stock, cannot distribute profits to owners, restricted to certain charitable
activities
4 theories for nonprofit hospital existence
1. altruistic-motive theory: some entrepreneurs prefer altruism over profits
2. government-failure theory: politics ineffectively help those in need
3. asymmetric information: donors trust nonprofits more with money
4. nonprofits are profits in disguise: "profits" are distributed as higher wages or nonmonetary
benefits
what are last resort laws
mandate that hospitals treat all who enter their emergency rooms
what is uncompensated care and how is it resolved
uncompensated care is all hospital charges not covered by insurance or OOP payments. unpaid
for hospital care is paid for by cross-subsidization (rich patients pay for poor patients)
______ drives the demand for insurance
risk aversion
risk averse ppl prefer _____ over _____
utility from expected income,
expected utility from uncertain income
full insurance is when ___=____
Ih=Is
actuarially fair insurance is;
CORRECT ANSWERS.
2 gov't options to improve social welfare in the presence of externalities
pigouvian tax/subsidy
coasian bargaining
two conditions of the coase theorem
1. property rights are well defined
2. transaction/bargaining costs are low
3 reasons why physicians are not perfect agents of care
1. overutilization of care
2. physician-induced demand/ defensive medicine
3. racial discrimination
3 types of hospital-physician relationships
1. "physician's workbench": not directly employed by hospital
2. direct employees
3. physician-owned hospitals
learning-by-doing hypothesis:
high volumes lead to good outcomes
selective-referral hypothesis:
good outcomes lead to higher volumes
3 other barriers to entry to the hospital industry other than limited competition
1. insurance: prices not transparent, moral hazard for insured patients
2. govt often sets prices
3. emergency nature of health care means that patients are unable to find the optimal facility
medical arms race hypothesis
, greater competition among hospitals for doctors can result in redundancy/overconsumption of
medical technologies that will result in increased costs without an improvement in quality
pros and cons of being a nonprofit hospital
pros: exempt from taxes, donors recieve a tax deduction
cons: cannot sell stock, cannot distribute profits to owners, restricted to certain charitable
activities
4 theories for nonprofit hospital existence
1. altruistic-motive theory: some entrepreneurs prefer altruism over profits
2. government-failure theory: politics ineffectively help those in need
3. asymmetric information: donors trust nonprofits more with money
4. nonprofits are profits in disguise: "profits" are distributed as higher wages or nonmonetary
benefits
what are last resort laws
mandate that hospitals treat all who enter their emergency rooms
what is uncompensated care and how is it resolved
uncompensated care is all hospital charges not covered by insurance or OOP payments. unpaid
for hospital care is paid for by cross-subsidization (rich patients pay for poor patients)
______ drives the demand for insurance
risk aversion
risk averse ppl prefer _____ over _____
utility from expected income,
expected utility from uncertain income
full insurance is when ___=____
Ih=Is
actuarially fair insurance is;
