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MHA 710 Healthcare Economics - Exam 3 | Latest
Updated 2025 Graded A+
In order to be a successful price discriminator, a provider must have a degree of market power (depicted by a downward-sloping demand curve) and meet what other condition(s)? a. Customers cannot know that different prices are being charged. b. Markets must be segmentable, identifying differences in ability to pay. c. Demand for services must be relatively price elastic. d. Profitable service expansion opportunities must be limited. e. The provider must have excess capacity to accommodate the extra business. - ✔✔b. Markets must be segmentable, identifying differences in ability to pay. Legislation considered by Congress to restrict legal immigration would: a. surprise many policymakers because Congress finds it difficult to agree on much of anything regarding immigration. b. improve employment prospects for native-born Americans. c. have little effect on medical markets, as so few physicians practicing medicine in the United States are foreigners. d. raise the costs of operating in many of the nation's rural and inner-city hospitals. e. allow more Americans trained abroad to compete for openings in United States' residency programs. - ✔✔d. raise the costs of operating in many of the nation's rural and inner-city hospitals.
Physicians who own their own diagnostic testing facilities tend to order more tests, charge higher fees for them, and have higher total bills to patients. This practice of self-referral is an example of: a. cognitive dissonance. b. physician-induced demand. c. moral hazard. d. adverse selection. e. res ipsa loquitur. - ✔✔b. physician-induced demand. Which of the following statements is true concerning the trend in community hospital care between inpatient and outpatient services since the mid-1980s? a. Both inpatient and outpatient services have been declining. b. There has been no noticeable trend in either inpatient or outpatient services. c. Both inpatient and outpatient services have been growing. d. Outpatient services have been growing, while inpatient services have been declining. e. Outpatient services have been declining, while inpatient services have been growing. - ✔✔d. Outpatient services have been growing, while inpatient services have been declining. The amount that Medicare pays a hospital for treating a Medicare patient is determined: a. at the point when the diagnosis is made. b. at the time of admission to the hospital. c. before the patient sees a physician. d. after the hospital bill is reviewed by Medicare auditors.
Economies of scale exist when: a. long-run average costs decline as output increases. b. long-run average costs increase as output increases. c. long-run average costs are constant. d. short-run average costs decline. e. short-run average costs increase. - ✔✔a. long-run average costs decline as output increases. Which of the following statements about the distribution of physicians among specialties is true in the United States? a. There are twice as many generalists as there are specialists. b. The majority of physicians specialize in general/family practice. c. There are twice as many specialists as there are generalists. d. The specialty distribution in the United States is similar to that of the rest of the world. - ✔✔c. There are twice as many specialists as there are generalists. Starting salaries for female obstetricians/gynecologists are higher than those of male obstetricians/gynecologists. What is the best explanation for this? a. There are more males in obstetrics/gynecology residency programs than females. b. The demand for female obstetricians/gynecologists is greater than the demand for male obstetricians/gynecologists. c. The demand for female obstetricians/gynecologists is less than the demand for male obstetricians/gynecologists.
d. Female obstetricians/gynecologists have more human capital than male obstetricians/gynecologists. - ✔✔b. The demand for female obstetricians/gynecologists is greater than the demand for male obstetricians/gynecologists. The rate of return on an investment in medical education: a. will increase with an increase in the availability of student loans. b. is inversely related to the number of years in the profession. c. is much higher than the rate of return on an undergraduate business degree. d. is inversely related to income. e. is inversely related to the length of time spent in formal schooling - ✔✔e. is inversely related to the length of time spent in formal schooling Suppose the market for nursing services in a local community is so dominated by a single community hospital that, for all practical purposes, it is considered a monopsony. Using the diagram below, answer the question. What is the equilibrium wage and level of employment under monopsony? a. W0 and E b. W2 and E c. W0 and E d. W0 and E e. W1 and E1 - ✔✔c. W0 and E
b. The switch to diagnosis-related group payments in the 1980s has actually had little effect on competition because so much of hospital spending comes from the federal government. c. Savings from prospective payments are substantial and due primarily to fewer hospital admissions and shorter hospital stays. d. Because patients pay such a small percentage of hospital bills, prospective payment has had little effect on hospital operations. - ✔✔c. Savings from prospective payments are substantial and due primarily to fewer hospital admissions and shorter hospital stays. Suppose the market for nursing services in a local community is so dominated by a single community hospital that, for all practical purposes, it is considered a monopsony. Using the diagram below, answer the question. If the market were perfectly competitive instead of dominated by a monopsonist, what would the equilibrium wage and level of employment be? a. W2 and E b. W0 and E c. W0 and E d. W0 and E e. W1 and E1 - ✔✔e. W1 and E Which of the following statements is true about cost shifting in hospitals? a. Regardless of payer mix, hospitals are taking full advantage of their bargaining power with payers who are able to cost shift.
b. Capacity-constrained medical providers are not able to cost shift. c. The positive correlation coefficient between cost-to-payment ratios for various payers indicates that cost shifting is taking place. d. The ability to cost shift depends on a hospital's payer mix. e. Classic Ramsey pricing can be interpreted in different ways, leading researchers into arguing that if it looks like cost shifting, it probably is cost shifting. - ✔✔d. The ability to cost shift depends on a hospital's payer mix. This study was the catalyst for the early twentieth century reform of medical education in the United States. What was it? a. Hill-Burton Committee b. Mangrum Report c. Coolidge Commission d. Flexner Report e. Kaiser Foundation Study - ✔✔d. Flexner Report Changes caused by the shift from charge-based rates to negotiated rates has had which of the following results? a. Charging master rates serve as a powerful guide for optimal resource allocation in the industry. b. The change has increased the importance of Ramsey pricing principles in setting rates. c. Most hospitals experience a gap between the amount they receive from their payers and the amount billed, with receipts as low as 20 percent of amount billed.
d. Making it easier for plaintiffs to prove medical malpractice claims e. Paying medical schools to eliminate residency opportunities in some specialties - ✔✔b. More scholarships and grants to cover medical school tuition Which of the following statements about the distribution of physicians among specialties is true in the United States? a. The majority of physicians specialize in general/family practice. b. There are twice as many generalists as there are specialists. c. There are twice as many specialists as there are generalists. d. The specialty distribution in the United States is similar to that of the rest of the world. e. None of the above. - ✔✔c. There are twice as many specialists as there are generalists. According to surveys by the Medical Group Management Association, the average primary care physician earned approximately in 2010. a. $125, b. $150, c. $185, d. $200, e. $225,000. - ✔✔d. $200, Surgical specialists earn more than general/family practice physicians. Which of the following statements is not true regarding this income differential? a. Surgeons earn more because their practice costs, including medical malpractice insurance is higher.
b. Surgeons earn more to compensate them for the extra years spent as residents. c. Physicians' incomes are determined to a large extent by supply and demand conditions with respect to each specialty. d. Surgeons will always earn more than general practitioners because they are smarter than general practitioners. e. Surgeons earn more than general practitioners because cutting into people is messy. - ✔✔d. Surgeons will always earn more than general practitioners because they are smarter than general practitioners. The rate of return on an investment in medical education a. is inversely related to the length of time spent in formal schooling. b. is inversely related to income. c. will increase with an increase in the availability of student loans. d. is much higher than the rate of return on an undergraduate business degree. e. is inversely related to the number of years in the profession. - ✔✔e. is inversely related to the number of years in the profession. Physicians who own their own diagnostic testing facilities tend to order more tests, charge higher fees for them, and have higher total bills to patients. This practice of self-referral is an example of a. moral hazard. b. adverse selection. c. res ipsa loquitur. d. physician-induced demand.
Suppose the number of medical school graduates continues to increase over the next decade. Which of the following is true? a. Physicians' salaries must fall. b. Physicians' salaries must rise. c. Physicians' salaries will fall only if the demand for medical services falls. d. Physicians' salaries will fall if the demand for medical services rises more than the supply of physicians rises. e. Physicians' salaries will rise if the demand for medical services rises more than the supply of physicians rises. - ✔✔e. Physicians' salaries will rise if the demand for medical services rises more than the supply of physicians rises. Physicians' salaries increased substantially over the decade 1995 - 2005 from an average of $215,000 to $315,000. What is the best explanation for this? a. Physicians were smarter in 2005 than in 1995. b. The supply of physicians has increased. c. The supply of physicians has decreased. d. The demand for physicians has increased. e. The demand for physicians has decreased. - ✔✔d. The demand for physicians has increased. Starting salaries for female OB/GYNs are higher than those of male OB/GYNs. What is the best explanation for this? a. Female OB/GYNs have more human capital than male OB/GYNs. b. Female OB/GYNs are smarter than male OB/GYNs.
c. The demand for female OB/GYNs is greater than the demand for male OB/GYNs. d. The demand for female OB/GYNs is less than the demand for male OB/GYNs. e. More males are in OB/GYN residency programs than females. - ✔✔c. The demand for female OB/GYNs is greater than the demand for male OB/GYNs. This study was the catalyst for the early twentieth-century reform of medical education in the United States. What was it? a. Coolidge Commission b. Hill-Burton Committee c. Mangrum Report d. Flexner Report e. Kaiser Foundation Study - ✔✔d. Flexner Report In the nineteenth century, hospitals had notorious reputations — they were questionable places to visit, risky places to stay. What advances changed all this? a. Development of the germ theory of disease b. Advances in medical technology c. Availability of health insurance to pay the bills d. All of the above - ✔✔d. All of the above The dominant factor affecting medical care delivery and finance in the 1960s was a. the Hill-Burton Act. b. prospective payment for hospitals.
d. Both have been growing. e. There has been no noticeable trend in either in-patient or outpatient services. - ✔✔c. Out- patient services have increased substantially because admissions are down. In order to be a successful price discriminator, a provider must have a degree of market power (depicted by a downward-sloping demand curve) and meet what other condition(s)? a. Prospective customers must be categorized according to willingness-to-pay. b. Opportunities for resale of the good or service must be limited. c. Customers cannot know that multiple prices are being charged. d. The provider must have excess capacity to accommodate the extra business. e. Both a and b. - ✔✔e. Both a and b. Congressional studies report that Medicare payments fall 11 percent below the cost of treating patients, while private insurance patients pay 29 percent more than cost. This phenomenon is called a. price discrimination. b. the Medigap. c. Cost shifting. d. cost-plus pricing. e. revenue enhancing. - ✔✔c. Cost shifting. The predominate organizational form for U.S. hospitals is not-for-profit. Why? a. The profit motive corrupts human behavior.
b. For-profit hospitals do not provide charity care. c. Private not-for-profit hospitals engage in most of the medical research. d. The not-for-profit form provides the most benefits to physicians. e. All of the above. - ✔✔d. The not-for-profit form provides the most benefits to physicians. Using the physician-control model to explain hospital behavior leads to which of the following conclusions? a. Other medical inputs tend to be over used to maximize physicians' productivity. b. The use of operating rooms will be maximized with little excess capacity. c. Physicians will strive to use the nursing staff efficiently. d. All investment decisions will be based on optimal resource use. e. All of the above are conclusions of the physician-control model. - ✔✔a. Other medical inputs tend to be over used to maximize physicians' productivity. The merger of two community hospitals located in the same geographic market is called a. vertical integration. b. horizontal integration. c. a leveraged buyout. d. a conglomerate merger. e. a real shame, since one of the hospitals will likely close. - ✔✔b. horizontal integration. Economies of scale exist when a. long-run average costs decline as output increases.
c. The increased cost of malpractice insurance for providers d. Rising incomes for physicians e. The rising cost of pharmaceutical drugs - ✔✔a. The increased use of expensive medical technology Rent-seeking behavior results in a. increased economic activity by promoting efficiency. b. lower economic activity by diverting resource to less-productive uses. c. a more equitable distribution of income and wealth. d. lower prices throughout the economy. e. greater income and wealth in the private sector. - ✔✔b. lower economic activity by diverting resource to less-productive uses. Of the new drugs introduced in the United States between 1940 and 1990, what percentage were discovered by U.S. firms? a. 15 percent b. 30 percent c. 45 percent d. 60 percent e. 75 percent - ✔✔d. 60 percent Pharmaceutical companies receive patents as an exclusive right to produce a drug. This results in a. normal profits on the patented drug.
b. monopoly status in the production of the drug. c. lower prices for patients requiring the drug. d. orphan drug status. e. fewer new chemical compounds discovered. - ✔✔b. monopoly status in the production of the drug. The regulatory agency with oversight responsibility for the pharmaceutical industry is the a. IRS. b. FDA. c. SEC. d. ITC. e. ATT. - ✔✔b. FDA. One of the primary reasons that costly technology is being introduced into the health care system is that a. research scientists have successfully mapped the human genome. b. high cost is synonymous with better outcomes. c. third-party insurance finances most of the cost of care. d. all of the above. - ✔✔c. third-party insurance finances most of the cost of care. The fastest-growing segment of pharmaceutical marketing is: a. marketing to physicians. b. marketing to nurse practitioners.
