Health Economics and Policy, 8th Edition
gT gT gT gT gT g T Solution Manual gT
by James W. Henderson.
gT gT gT gT
1 Opportunity gTcost gTis gTa gTmeasure gTof
a. foregone gTopportunities.
b. value gTbased gTon gTthe gTalternative gTnot gTchosen.
c. value gTin gTterms gTof gTthe gTcost gTof gTproduction.
d. the gTdifference gTbetween gTproduction gTcost gTand gTresource gTcost.
e. both gTa gTand gTb.
2. The gTopportunity gTcost gTof gTinvesting gTin gTa gTnew gTlithotripter gT(a gTmachine gTthat gTpulverizes gTkidney
gTstones gTwith gTsound gTwaves) gTis
a. defined gTby gTthe gTdollar gTcost gTof gTthe gTequipment.
b. the gTsame gTfor gTevery gThealth gTcare gTprovider.
c. measured gTby gTthe gTdifference gTbetween gTthe gTexpected gTrevenues gTfrom gTselling gTthe
gTservices gTof gTthe gTlithotripter gTand gTthe gTinvoice gTcost gTof gTthe gTmachine.
d. defined gTby gTthe gTnext gTbest gTuse gTof gTthe gTmoney gTinvested gTin gTthe gTequipment.
e. impossible gTto gTcalculate.
3. The gT“invisible gThand” gTusing gTAdam gTSmith’s gTterminology gTrefers gTto
a. government gTcontrol gTof gTthe gTmarket.
b. market gTforces gTworking gTthrough gTthe gTprice gTmechanism.
c. the gTmoney gTsupply gTthat gTserves gTto gTkeep gTthe gTeconomy gTworking gTsmoothly.
d. the gTrole gTof gTinnovation gTin gTmaintaining gTa gTsteady gTrate gTof gTgrowth.
e. “behind-the-scenes” g T policy g T making g T to g T influence g T how g T markets
g T allocate g T scarce gTresources.
4. According gTto gTrecent gTpublic gTopinion gTpolls, gTwhat gTpercentage gTof gTAmericans gTare gTsatisfied
gTwith gTthe gTquality gTof gTthe gTmedical gTcare gTthey gTreceive?
a. 15 gTpercent.
b. 40 gTpercent.
c. 65 gTpercent.
d. 70 gTpercent.
e. 90 gTpercent.
© gT2015 gTCengage gTLearning. gTAll gTRights gTReserved. gTMay gTnot gTbe gTcopied, gTscanned, gTor gTduplicated, gTin
gTwhole gTor
in gTpart, gTexcept gTfor gTuse gTas gTpermitted gTin gTa gTlicense gTdistributed gTwith gTa gTcertain gTproduct gTor gTservice
gTor gTotherwise gTon gTa gTpassword-protected gTwebsite gTfor gTclassroom gTuse.
,5. Charging gThigher gTprices gTfor gTone gTcategory gTof gTpatients gTin gTorder gTto gTprovide gTfree gTor
gTsubsidized gTcare gTto gTanother gTgroup gTis gTcalled
a. price gTdiscrimination.
b. cost-shifting.
c. categorical gTcosting.
d. reprehensible gTand gTunethical.
e. creative gTaccounting.
6. According gTto gTeconomic gTtheory gTwhat gTis gTthe gToptimal gTpercentage gTof gTGDP gTto gTbe gTspent
gTon gTmedical gTcare?
a. 6 gTpercent.
b. 8 gTpercent.
c. 10 gTpercent.
d. 12 gTpercent.
e. There gTis gTno gTwidely-accepted gTway gTto gTdetermine gTthe gToptimal gTpercentage.
7. What gTphrase gTbest gTdescribes gTmedical gTcare gTspending gTin gTthe gTUnited gTStates gTin gT1998?
a. Total gTspending gTof gTmore gTthan gT$2 gTtrillion gTrepresents gT17 gTpercent gTof gTGDP gTand
gTapproximately
$8,000 gTper gTcapita.
b. Total gTspending gTof gTmore gTthan gT$1 gTtrillion gTrepresents gT14.8 gTpercent gTof gTGDP gTand gTalmost
gT$6,000 gTper gTcapita.
c. Total gTspending gTof gTless gTthan gT$1 gTtrillion gTrepresents gTless gTthan gT13 gTpercent gTof gTGDP gTand
gTalmost
$3,000 gTper gTcapita.
d. Total gTspending gTis gTrising gTat gTdouble-digit gTrates gTand gTspending gTis gTsoaring gTto gTover
gT$5,000 gTper gTcapita.
e. Total gTspending gTis gTunder gTcontrol gTand gTrepresents gTa gTshrinking gTpercentage gTof gTGDP.
8. The gT1974 gTfederal gTlegislation gTthat gTexempted gTemployers gTfrom gTcertain gTstate gTlaws gTgoverning
gThealth gTinsurance gTwas
a. COBRA
b. ERISA
c. CON
d. HIPAA
e. SCHIP
9. Which gTof gTthe gTfollowing gTstatements gTis gTbased gTon gTpositive gTanalysis?
a. Individuals g T without g T health g T insurance g T have g T less g T access g T to g T physicians’
g T services g T than gTthose gTwho gThave gThealth gTinsurance.
b. The gThigh gTcost gTof gThealth gTinsurance gTplaces gTU.S. gTfirms gTat gTa gTcompetitive
gTdisadvantage gTwith gTtheir gTforeign gTcompetitors.
c. Employers gTshould gTbe gTrequired gTto gTprovide gThealth gTinsurance gTfor gTall gTfull-time gTworkers
gTand gTtheir gTdependents.
© gT2015 gTCengage gTLearning. gTAll gTRights gTReserved. gTMay gTnot gTbe gTcopied, gTscanned, gTor gTduplicated, gTin
gTwhole gTor
in gTpart, gTexcept gTfor gTuse gTas gTpermitted gTin gTa gTlicense gTdistributed gTwith gTa gTcertain gTproduct gTor gTservice
gTor gTotherwise gTon gTa gTpassword-protected gTwebsite gTfor gTclassroom gTuse.
, d. none gTof gTthe gTabove.
© gT2015 gTCengage gTLearning. gTAll gTRights gTReserved. gTMay gTnot gTbe gTcopied, gTscanned, gTor gTduplicated, gTin
gTwhole gTor
in gTpart, gTexcept gTfor gTuse gTas gTpermitted gTin gTa gTlicense gTdistributed gTwith gTa gTcertain gTproduct gTor gTservice
gTor gTotherwise gTon gTa gTpassword-protected gTwebsite gTfor gTclassroom gTuse.
, e. Both gTa gTand gTb.
10. Economists gTuse gTthe gTterm gT“marginal” gTto gTdescribe gTcosts gTand gTbenefits
a. that gTare gTminimal gTand gThardly gTworth gTnoting.
b. that gTare gTincremental gTand gTthus gTrelevant gTto gTdecision gTmaking.
c. that gTare gTnoteworthy gTbut gTnot gTthe gTmost gTimportant.
d. whose gTimportance gTcan gTbe gTminimized gTthrough gThard gTwork.
e. none gTof gTthe gTabove.
11. Self gTinsurance gTrefers gTto: gTthe gTpractice gTof gTsetting gTaside gTfunds gTto gTpay gTfor gTmedical gTcare
gTexpenses gTinstead gTof gTpaying gTpremiums gTto gTan gTinsurance gTcompany. g T Approximately, gT of
gTall gTemployees gTwho gTparticipate gTin gTgroup gTinsurance gTplans gTwork gTfor gTfirms gTthat gTself-insure.
a. starting gTone’s gTown gTinsurance gTcompany
b. buying gTinsurance gTfrom gTa gTnot gTfor gTprofit gTentity
c. setting gTaside gTfund gTto gTpay gTfor gTmedical gTcare gTexpenses gTinstead gTof gTbuying gTinsurance
d. none gTof gTthese
e. both gTa gTand gTb
12. Which gTof gTthe gTfollowing gTis gTnot gTa gTcharacteristic gTthat gTmakes gTmedical gTcare gTdifferent
gTfrom gTother gTcommodities?
a. Demand gTfor gTmedical gTcare gTis gTirregular.
b. Sellers gThave gTmore gTinformation gTthan gTbuyers.
c. Third-party gTpayers gTabound.
d. For-profit gTproviders gTplay gTa gTmajor gTrole gTin gTdelivering gTmedical gTcare.
e. The gTtransaction gTitself gTif gTfilled gTwith gTuncertainty.
Structured gTDiscussion:
1. Resolved: gTThe gTUnited gTStates gTsystem gTof gThealth gTcare gTdelivery gTis gTin gTa gTstate gTof gTcrisis.
2. Resolved: g T The g T recent g T slowing g T of g T health g T care g T spending g T as g T a g T share g T of
g T gross g T domestic
product gTwill gTcontinue. gT In gTother gTwords, gTthe gTrelative gTsize gTof gTthe gThealth gTcare
gT sector gThas gTreached gTa gTnatural gTlimit.
Appendix gT1A: gTThe gTMedical gTCare gTPrice gTIndex
This gTappendix gTdemonstrates gTthe gTuse gTof gTprice gTindexes gTto gTmeasure gTprice gTchanges.
gT Caution gTis gTadvised gTin gTinterpreting gTchanges gTin gTfixed-weight gTindexes, gTsuch gTas gTthe
gT Consumer gTPrice gTIndex gT(CPI) gTand gTthe gTMedical gTCare gTPrice gTIndex gT(MCPI), gTas gTa gTmeasure gTof
gT inflation. g T Problems gTin gTusing gTthe gTMCPI
© gT2015 gTCengage gTLearning. gTAll gTRights gTReserved. gTMay gTnot gTbe gTcopied, gTscanned, gTor gTduplicated, gTin
gTwhole gTor
in gTpart, gTexcept gTfor gTuse gTas gTpermitted gTin gTa gTlicense gTdistributed gTwith gTa gTcertain gTproduct gTor gTservice
gTor gTotherwise gTon gTa gTpassword-protected gTwebsite gTfor gTclassroom gTuse.
gT gT gT gT gT g T Solution Manual gT
by James W. Henderson.
gT gT gT gT
1 Opportunity gTcost gTis gTa gTmeasure gTof
a. foregone gTopportunities.
b. value gTbased gTon gTthe gTalternative gTnot gTchosen.
c. value gTin gTterms gTof gTthe gTcost gTof gTproduction.
d. the gTdifference gTbetween gTproduction gTcost gTand gTresource gTcost.
e. both gTa gTand gTb.
2. The gTopportunity gTcost gTof gTinvesting gTin gTa gTnew gTlithotripter gT(a gTmachine gTthat gTpulverizes gTkidney
gTstones gTwith gTsound gTwaves) gTis
a. defined gTby gTthe gTdollar gTcost gTof gTthe gTequipment.
b. the gTsame gTfor gTevery gThealth gTcare gTprovider.
c. measured gTby gTthe gTdifference gTbetween gTthe gTexpected gTrevenues gTfrom gTselling gTthe
gTservices gTof gTthe gTlithotripter gTand gTthe gTinvoice gTcost gTof gTthe gTmachine.
d. defined gTby gTthe gTnext gTbest gTuse gTof gTthe gTmoney gTinvested gTin gTthe gTequipment.
e. impossible gTto gTcalculate.
3. The gT“invisible gThand” gTusing gTAdam gTSmith’s gTterminology gTrefers gTto
a. government gTcontrol gTof gTthe gTmarket.
b. market gTforces gTworking gTthrough gTthe gTprice gTmechanism.
c. the gTmoney gTsupply gTthat gTserves gTto gTkeep gTthe gTeconomy gTworking gTsmoothly.
d. the gTrole gTof gTinnovation gTin gTmaintaining gTa gTsteady gTrate gTof gTgrowth.
e. “behind-the-scenes” g T policy g T making g T to g T influence g T how g T markets
g T allocate g T scarce gTresources.
4. According gTto gTrecent gTpublic gTopinion gTpolls, gTwhat gTpercentage gTof gTAmericans gTare gTsatisfied
gTwith gTthe gTquality gTof gTthe gTmedical gTcare gTthey gTreceive?
a. 15 gTpercent.
b. 40 gTpercent.
c. 65 gTpercent.
d. 70 gTpercent.
e. 90 gTpercent.
© gT2015 gTCengage gTLearning. gTAll gTRights gTReserved. gTMay gTnot gTbe gTcopied, gTscanned, gTor gTduplicated, gTin
gTwhole gTor
in gTpart, gTexcept gTfor gTuse gTas gTpermitted gTin gTa gTlicense gTdistributed gTwith gTa gTcertain gTproduct gTor gTservice
gTor gTotherwise gTon gTa gTpassword-protected gTwebsite gTfor gTclassroom gTuse.
,5. Charging gThigher gTprices gTfor gTone gTcategory gTof gTpatients gTin gTorder gTto gTprovide gTfree gTor
gTsubsidized gTcare gTto gTanother gTgroup gTis gTcalled
a. price gTdiscrimination.
b. cost-shifting.
c. categorical gTcosting.
d. reprehensible gTand gTunethical.
e. creative gTaccounting.
6. According gTto gTeconomic gTtheory gTwhat gTis gTthe gToptimal gTpercentage gTof gTGDP gTto gTbe gTspent
gTon gTmedical gTcare?
a. 6 gTpercent.
b. 8 gTpercent.
c. 10 gTpercent.
d. 12 gTpercent.
e. There gTis gTno gTwidely-accepted gTway gTto gTdetermine gTthe gToptimal gTpercentage.
7. What gTphrase gTbest gTdescribes gTmedical gTcare gTspending gTin gTthe gTUnited gTStates gTin gT1998?
a. Total gTspending gTof gTmore gTthan gT$2 gTtrillion gTrepresents gT17 gTpercent gTof gTGDP gTand
gTapproximately
$8,000 gTper gTcapita.
b. Total gTspending gTof gTmore gTthan gT$1 gTtrillion gTrepresents gT14.8 gTpercent gTof gTGDP gTand gTalmost
gT$6,000 gTper gTcapita.
c. Total gTspending gTof gTless gTthan gT$1 gTtrillion gTrepresents gTless gTthan gT13 gTpercent gTof gTGDP gTand
gTalmost
$3,000 gTper gTcapita.
d. Total gTspending gTis gTrising gTat gTdouble-digit gTrates gTand gTspending gTis gTsoaring gTto gTover
gT$5,000 gTper gTcapita.
e. Total gTspending gTis gTunder gTcontrol gTand gTrepresents gTa gTshrinking gTpercentage gTof gTGDP.
8. The gT1974 gTfederal gTlegislation gTthat gTexempted gTemployers gTfrom gTcertain gTstate gTlaws gTgoverning
gThealth gTinsurance gTwas
a. COBRA
b. ERISA
c. CON
d. HIPAA
e. SCHIP
9. Which gTof gTthe gTfollowing gTstatements gTis gTbased gTon gTpositive gTanalysis?
a. Individuals g T without g T health g T insurance g T have g T less g T access g T to g T physicians’
g T services g T than gTthose gTwho gThave gThealth gTinsurance.
b. The gThigh gTcost gTof gThealth gTinsurance gTplaces gTU.S. gTfirms gTat gTa gTcompetitive
gTdisadvantage gTwith gTtheir gTforeign gTcompetitors.
c. Employers gTshould gTbe gTrequired gTto gTprovide gThealth gTinsurance gTfor gTall gTfull-time gTworkers
gTand gTtheir gTdependents.
© gT2015 gTCengage gTLearning. gTAll gTRights gTReserved. gTMay gTnot gTbe gTcopied, gTscanned, gTor gTduplicated, gTin
gTwhole gTor
in gTpart, gTexcept gTfor gTuse gTas gTpermitted gTin gTa gTlicense gTdistributed gTwith gTa gTcertain gTproduct gTor gTservice
gTor gTotherwise gTon gTa gTpassword-protected gTwebsite gTfor gTclassroom gTuse.
, d. none gTof gTthe gTabove.
© gT2015 gTCengage gTLearning. gTAll gTRights gTReserved. gTMay gTnot gTbe gTcopied, gTscanned, gTor gTduplicated, gTin
gTwhole gTor
in gTpart, gTexcept gTfor gTuse gTas gTpermitted gTin gTa gTlicense gTdistributed gTwith gTa gTcertain gTproduct gTor gTservice
gTor gTotherwise gTon gTa gTpassword-protected gTwebsite gTfor gTclassroom gTuse.
, e. Both gTa gTand gTb.
10. Economists gTuse gTthe gTterm gT“marginal” gTto gTdescribe gTcosts gTand gTbenefits
a. that gTare gTminimal gTand gThardly gTworth gTnoting.
b. that gTare gTincremental gTand gTthus gTrelevant gTto gTdecision gTmaking.
c. that gTare gTnoteworthy gTbut gTnot gTthe gTmost gTimportant.
d. whose gTimportance gTcan gTbe gTminimized gTthrough gThard gTwork.
e. none gTof gTthe gTabove.
11. Self gTinsurance gTrefers gTto: gTthe gTpractice gTof gTsetting gTaside gTfunds gTto gTpay gTfor gTmedical gTcare
gTexpenses gTinstead gTof gTpaying gTpremiums gTto gTan gTinsurance gTcompany. g T Approximately, gT of
gTall gTemployees gTwho gTparticipate gTin gTgroup gTinsurance gTplans gTwork gTfor gTfirms gTthat gTself-insure.
a. starting gTone’s gTown gTinsurance gTcompany
b. buying gTinsurance gTfrom gTa gTnot gTfor gTprofit gTentity
c. setting gTaside gTfund gTto gTpay gTfor gTmedical gTcare gTexpenses gTinstead gTof gTbuying gTinsurance
d. none gTof gTthese
e. both gTa gTand gTb
12. Which gTof gTthe gTfollowing gTis gTnot gTa gTcharacteristic gTthat gTmakes gTmedical gTcare gTdifferent
gTfrom gTother gTcommodities?
a. Demand gTfor gTmedical gTcare gTis gTirregular.
b. Sellers gThave gTmore gTinformation gTthan gTbuyers.
c. Third-party gTpayers gTabound.
d. For-profit gTproviders gTplay gTa gTmajor gTrole gTin gTdelivering gTmedical gTcare.
e. The gTtransaction gTitself gTif gTfilled gTwith gTuncertainty.
Structured gTDiscussion:
1. Resolved: gTThe gTUnited gTStates gTsystem gTof gThealth gTcare gTdelivery gTis gTin gTa gTstate gTof gTcrisis.
2. Resolved: g T The g T recent g T slowing g T of g T health g T care g T spending g T as g T a g T share g T of
g T gross g T domestic
product gTwill gTcontinue. gT In gTother gTwords, gTthe gTrelative gTsize gTof gTthe gThealth gTcare
gT sector gThas gTreached gTa gTnatural gTlimit.
Appendix gT1A: gTThe gTMedical gTCare gTPrice gTIndex
This gTappendix gTdemonstrates gTthe gTuse gTof gTprice gTindexes gTto gTmeasure gTprice gTchanges.
gT Caution gTis gTadvised gTin gTinterpreting gTchanges gTin gTfixed-weight gTindexes, gTsuch gTas gTthe
gT Consumer gTPrice gTIndex gT(CPI) gTand gTthe gTMedical gTCare gTPrice gTIndex gT(MCPI), gTas gTa gTmeasure gTof
gT inflation. g T Problems gTin gTusing gTthe gTMCPI
© gT2015 gTCengage gTLearning. gTAll gTRights gTReserved. gTMay gTnot gTbe gTcopied, gTscanned, gTor gTduplicated, gTin
gTwhole gTor
in gTpart, gTexcept gTfor gTuse gTas gTpermitted gTin gTa gTlicense gTdistributed gTwith gTa gTcertain gTproduct gTor gTservice
gTor gTotherwise gTon gTa gTpassword-protected gTwebsite gTfor gTclassroom gTuse.
