Health Economics Theory Insights And Industry Studies 6th Edition By Dr. Rexford E. – Test Bank

1. _______ is the situation where insured individuals alter their behavior because they are no longer financially responsible for the full cost of their behavior.
a. Moral Hazard
b. Asymmetric Information
c. Rationality
d. Scale Economies
e. Adverse Selection

2. _______ exist when the average total cost of providing insurance coverage decreases as a firm provides coverage for larger groups of people.
a. Moral Hazard
b. Asymmetric Information
c. Rationality
d. Scale Economies
e. Adverse Selection

3. _______ reasons that firm-size classes with expanding populations are more efficient than those with shrinking populations over time.
a. Scale Economies
b. Economies of Scope
c. Survivor Theory
d. Search Frictions
e. none of the above

4. Which of the following reasons might explain why health insurance purchased as a group might be less costly than coverage purchased individually?
a. Greater bargaining power
b. Risk spreading over a larger number of people
c. Lower marketing costs for the provider
d. Both a and b
e. All of the above

5. To maximize profits, a dominant insurance provider will set the price for insurance such that the marginal revenue of providing coverage is _______ of providing coverage.
a. greater than the marginal cost
b. less than the average total cost
c. equal to the marginal cost
d. equal to the average total cost
e. none of the above

6. _______ occurs when high-risk individuals subscribe to an insured group of low-risk individuals.
a. Moral Hazard
b. Asymmetric Information
c. Rationality
d. Scale Economies
e. Adverse Selection

7. Which of the following reasons might explain why managed care organizations might be able to lower healthcare costs with premiums similar to fee-for-service plans?
a. The lower health care costs of managed care plans may be offset by higher administrative costs.
b. Managed care organizations may set their premiums just below that of their competitors.
c. Managed care organizations may compete with one another based on service offerings rather than price.
d. Both a and c
e. All of the above

8. Individuals who have access to large-group coverage are _______ likely to fall victim of cherry-picking behavior because the total cost of health insurance is distributed among a _______ number of subscribers.
a. less; larger
b. more; larger
c. less; smaller
d. equally; similar
e. equally; larger

9. _______ occurs when insurance companies structure plans that provide an incentive for healthier consumers to enroll while discouraging enrollment of higher-risk individuals.
a. Moral Hazard
b. Asymmetric Information
c. Cherry-picking
d. Guaranteed renewability
e. Adverse Selection

10. _______ occurs when consumers have less incentive to avoid risky behaviors.
a. Ex post moral hazard
b. Ex ante moral hazard
c. Adverse selection
d. Asymmetric information
e. none of the above

Answers:

1. a
2. d
3. c
4. e
5. c
6. e
7. e
8. a
9. c
10. b