EXAM 2 (2/11/2021)

1. Why does the Supplier-Induced Demand Hypothesis, if it is true, represents a serious threat to
mainstream economic theory?
a. Because it means that suppliers can make consumers to demand more healthcare
b. Because it undermines demand and supply analysis, in particular by invalidating the
independence of demand and supply
c. Because it means that policy makers should try to limit the number of doctors working in an
area
d. Because it means that the government should increase the number of doctors graduating from
medical schools and also increase the number of immigrants who are doctors
e. None of the above

2. Ex post moral hazard indicates ____

a. Under provision of preventive care by physicians
b. None is correct
c. Overconsumption of healthcare generated by policyholders’ health insurance coverage
d. Excessive coverage caused by policyholders’ consumption of healthcare
e. Vertical integration between insurer and provider

3. The organizational structure in HMO is such that ____

a. Policyholders do not have freedom in choosing their provider and can access a specialist only
after a gatekeeping process
b. Policyholders do not have freedom in choosing their provider but can access a specialist any
time they are willing to do so
c. Policyholders have freedom in choosing their provider but can access a specialist only after a
gatekeeping process
d. Policyholders have freedom in choosing their provider and can access a specialist any time they
are willing to do so

4. Ex ante and ex post moral hazard respectively are ____

a. Inefficiencies cause by insurers’ behaviours before and after the health shock realizes
b. Partial coverage and excessive coverage caused by policyholders’ consumption of healthcare
c. None is correct
d. Carelessness and over consumption of healthcare caused by policyholders’ coverage
e. Cost saving generated by policyholders’ behaviours after and before the health shock realizes

5. In ____ countries the ____ productivity of healthcare expenditure is ____ than its ____ productivity
a. None is correct
b. High income ____ marginal ____larger ___ average
c. Low income ____ marginal ___ much lower ___ average
d. Low income ____ average ____ much lower ___ marginal
e. High income ____ average ___ much lower ___ marginal
6. In a universal and compulsory public insurance system
a. We observe both moral hazard and adverse selection
b. We observe moral hazard but not adverse selection
c. None is correct
d. We observe adverse selection but not moral hazard
e. We observe neither moral hazard nor adverse selection

7. Under adverse selection, a welfare improving government intervention is such that, together with a
separating contract ____
a. High risk individuals are offered a public policy
b. None of the named alternatives is correct
c. High and low risk individuals are offered a public pooling contract with partial insurance at a
fair premium
d. Low risk individuals are offered a subsidy
e. High and low risk individuals are offered a public separating contract with partial insurance at a
fair premium

8. Enrolees in ____ plans are ____ than enrolees in ____plans

a. None of the named alternatives
b. HMOs ___ less healthy ____ traditional
c. Traditional ____ less risk averse ____ HMOs
d. HMOs ___ more risk averse ____traditional
e. Traditional ____ older ____ HMOs

9. In the Grossmann model ___

a. ___aging shifts the marginal efficiency of investment in health curve inward
b. ___one’s level of health is completely controlled by her actions so that in any given period, an
individual is unconstrained in her choice of health status
c. ___ the marginal efficiency of investment in health declines as health improves
d. Both a and c are correct
e. Both b and c are correct
f. None of the above

10. Ignoring time costs makes the demand for healthcare to be ____
a. LESS elastic to full price than it is
b. MORE elastic to full price than it is

11. A risk averse individual will spend 25$ to buy the ticket of a lottery that provides 50$ with
probability p = 50% and nothing otherwise
a. TRUE
b. FALSE

12. Provide arguments in support to a 2-parts pay scheme for reimbursing physicians