QUESTION 1 If E is total medical expenditure, P is price and Q is quantity of me

Question

QUESTION 1

If E is total medical expenditure, P is price and Q is quantity of medical care, total medical expenditure is:

E=Q*Q

E=P*E

E=P*Q

E=P*P

2 points   

QUESTION 2

Quantity of medical care may increase due to the following reasons, except:

An aging population

inflation

Richer population

More insurance coverage

2 points   

QUESTION 3

Rise in costs is a bad thing

If rising costs are due to rising prices

If rising costs are due to rising demand

It is bad anyway

None

2 points   

QUESTION 4

In the last thirty years, US medical care CPI has been

Consistently lower than the overall inflation

Consistently higher than the overall inflation

Constant

Fluctuating around the overall inflation

2 points   

QUESTION 5

Based on Arrow’s impossibility theorem

Highest level of health, wealth, and equity are achievable at the same time

Societies do not necessarily have transitive preferences, even when everyone in them does

Achieving an equitable health system is impossible

Everything is impossible

2 points   

QUESTION 6

Which one is an option for health insurance market

Universal public insurance

Compulsory insurance

Employer-sponsored insurance

All of the above

2 points   

QUESTION 7

Which problem is not an issue in a universal public insurance

Moral hazard

Adverse selection

Overutilization

None of the above

2 points   

QUESTION 8

Which medical specialty is sued the most frequently?

Neurosurgery

Cardiac

Emergency room

Psychiatry

2 points   

QUESTION 9

Which one is not a strategy used in managed care?

Gatekeeping

Denials of coverage

Group discounting

Monitoring

2 points   

QUESTION 10

Which theory does best explain the increasing trend in obesity in the past 150 years

Decline in food prices

Changes in the food industry

Genetics

Increase in women’s labor force participation

a.

E=Q*Q

b.

E=P*E

c.

E=P*Q

d.

E=P*P

Explanation / Answer

1) It has been said that E is total medical expenditure, P is price and Q is quantity of medical care. Therefore total medical expenditure will be the price of medical care times the quantity of medical care. That is, E = P*Q. Therefore, the correct option is:

c.

E=P*Q

2) The quantity of medical care refers to the amount of medical care bought. The demand for medical care will increase if ageing population rises, if the population becomes richer (because they have more money to spend on medical care) and if there is more insurance coverage (as citizens get better benefits in terms of medical expenses). However, the quantity demanded of medical care will decrease if there is inflation because a rise in the price level makes medical care more costly and less affordable. The downward slope of the demand curve proves that when medical care becomes costly, quantity demanded falls. Therefore the correct option is:

b.

inflation

3) Rise in cost can be due to various reasons. One of the reasons may be rise in demand. This is a healthy sign for the economy as higher demand stimulates economic growth and production and also proves that fact that people do have enough money to generate a higher demand. Higher demand necessarily means an upward push in the level of real GDP or output. However, if the rise in cost is due rising prices (for example, rise in price of oil which is an important input in the production process), there is a negative shock in the sense that the aggregate supply reduces. This is a situation where output falls but costs/prices increase and is known as “stagflation” which is bad for the economy. Therefore the correct option is:

If rising costs are due to rising prices

4) Consumer Price Index (CPI) is a measure of the change in price level, which measures inflation. If the CPI of all items in the US, which denotes ‘overall’ inflation is mapped along with the CPI of medical care in isolation, it will be seen that the latter is consistently higher in the US in the last three decades. Medical care and healthcare inflation in US has made the country quite popular as opposed to overall level of CPI. Therefore the correct option is:

b.

Consistently higher than the overall inflation

5) Arrow’s Impossibility Theorem states that in a society, no voting system can ever satisfy the principles of unanimity, transitivity, independence of unnecessary choices and no dictatorship. The principle of transitivity in economics says that when a group prefers option A over B and option B or C, it necessarily prefers option A over C. However, this does not hold true in the society as far as voting option for leaders are concerned. Therefore the correct option is:

Societies do not necessarily have transitive preferences, even when everyone in them does

c.

E=P*Q

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