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Exam 2: The Role of Government in Health and Medical Care

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Question 1

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In the graph above, which area represents the size of the externality?

A) I
B) II
C) III
D) Iv

E) C) and D)
F) A) and B)

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Question 2

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Externalities occurred due to

A) A lack of property rights
B) A lack of government oversight
C) Poor choices made by firms
D) Poor choices made by consumers

E) B) and C)
F) All of the above

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Question 3

Multiple Choice

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Which of the following are reasons for the government to intervene in the medical market?

A "natural monopoly" is the result of

Use the following information to answer the questions below.You are an advisor to a teaching hospital.The marginal private benefit to consumers of an inpatient day at this hospital is MPB = 1000 - 4Q and the marginal private cost is equal to $200. -Given both the marginal external benefit and the marginal external cost,what is the net effect on society of producing at the private optimum?

Use the following information to answer the questions below.You are an advisor to a teaching hospital.The marginal private benefit to consumers of an inpatient day at this hospital is MPB = 1000 - 4Q and the marginal private cost is equal to $200. -Each inpatient day at the teaching hospital helps train medical residents to become better physicians.This has a social external benefit MEB to society of $200 per inpatient day.Graph the MEB curve and find the socially optimal price and quantity.

In the graph above, the socially optimal price is

The private market cannot eliminate externalities when

Use the following information to answer the questions below.You are an advisor to a teaching hospital.The marginal private benefit to consumers of an inpatient day at this hospital is MPB = 1000 - 4Q and the marginal private cost is equal to $200. -An unpleasant byproduct of hospital production is medical waste.Medical waste has an external marginal cost (MEC)of $100 per inpatient day.Graph the marginal social cost curve

Which of the following transfers is most efficient?

In the graph above, the private market price is

Which of the following is not an example of a demand subsidy?

The demand curve for flu shots is P = 100 - 2Q,and the supply curve for flu shots is P = 19 + Q where Q is a million shots per year and P is the dollars per shot.Assume that the flu shots generate an additional benefit in that it reduces the likelihood of others getting sick.This benefit is valued at $6 per shot per year.The private market equilibrium quantity of shots produced is ____________________________,but the socially optimal amount of shots is ________________________________.

Which of the following is not an "in kind" transfer?

The arguments against price competition in the medical care market is

Which of the following is an example of an externality in the cigarette market?

Use the following information to answer the questions below.You are an advisor to a teaching hospital.The marginal private benefit to consumers of an inpatient day at this hospital is MPB = 1000 - 4Q and the marginal private cost is equal to $200. -Find the equilibrium price and quantity in the private market.

Use the following information to answer the questions below.You are an advisor to a teaching hospital.The marginal private benefit to consumers of an inpatient day at this hospital is MPB = 1000 - 4Q and the marginal private cost is equal to $200. -Graph the Marginal Private Cost (MPC)and the Marginal Private Benefit.

When the marginal propensity to consume is less than 1, the

Which of the following statements is true about the medical care market?