Economics
504 and Health Care Management 504
Possible
Test Questions and Review
Midterm
Exam
- 1. In class, we discussed two different types of
efficiency: technological (productive) efficiency and
allocative (consumption) efficiency. Do the following:
- a. Carefully define each type of efficiency. Briefly
explain the similarities and differences between each
type.
- b. For most firms, profit maximization ensures that the
firms will be technologically efficient. Why? Briefly
explain your answer.
- c. For most industries, competition ensures that the
industry will be allocatively efficient. Why? Briefly
explain your answer.
- d. Contrary to most firms, we suggested that profit
maximizing firms in the medical industry may not be
technologically efficient. Why? Briefly explain your
answer.
- e. Contrary to most industries, we suggested that
competition may not ensure allocative efficiency in the
medical industry. Why? Briefly explain your answer.
- 2. Carefully define the following terms in a few
sentences.
- a. marginal benefit
- b. scarcity
- c. the "law" of demand
- d. consumer surplus
- e. stable equilibrium
- f. positive externality
- g. average variable cost
- h. coinsurance
- i. production function
- j. productivity of medical care on the intensive margin
- k. transitive preferences
- l. cost minimization
- m. budget constraint
- n. marginal utility
- o. indifference curve
- p. medical care
- q. consumer price index
- r. demand for health
- s. the full price of medical care
- t. the patient's agent
- u. induced demand for medical care
- v. isoquant
- w. lemon principle
- x. QALY
- y. cost effectiveness analysis
- z. discount rate
- aa. statistically significant
- bb. multiple regression analysis
-
-
- 3. Give a brief answer to all of the following
questions.
- a. Briefly define "medical care need" and
"demand for medical care". Briefly discuss the
similarities and differences of the two concepts. Briefly
explain, using graphical analysis, the likely impact of
the use of medical care need for planning in the medical
industry.
- b. Currently expenditures on hospital services account
for approximately 50 percent of total spending on medical
care. In addition, physician services are much less
costly than hospital services. As a result, it has been
argued that one way to reduce high medical care costs is
to subsidize physician education. Comment on the
effectiveness of this proposal. (Under what conditions
would the proposal be effective in reducing
expenditures?) Briefly explain.
- c. What impact does an increase in the supply of nurses
have upon the market for nurses and the market for
physicians? What assumptions must be made to answer this
question? Briefly explain.
- d. We suggested in class that it was difficult to measure
either health or medical care. Why? Why is this issue
important from a public policy standpoint?
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