How different is medical care from other commodities?

Arrow based his thesis on a number of

characteristics that contribute to the unique nature of medical care. Which of the following
characteristics was not one of those he lists?
a. Trust

b. Barriers to entry

c. Primary payment from insurance

d. Preponderance of not-for-profit providers

e. Asymmetric information
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Approximately what percentage of total health care spending goes toward hospital care?
a. One-fifth

b. One-fourth

c. One-tenth

d. One-half

e. One-third
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Approximately what percentage of total health care spending goes toward physicians' services?
a. One-fourth

b. One-half

c. One-third

d. One-tenth

e. One-sixth
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Baumol argued that in an economy where productivity is growing in most sectors (called progressive
sectors) and lagging in a few (non-progressive sectors), employment can still increase in the non-
progressive sectors:
a. if employers in the non-progressive sectors lower wages.

b. by transferring resources from cost-saving innovation in the progressive sector to the non-progressive sector.

c. by investing in more labor-saving technology in the non-progressive sector.

d. as long as resources are transferred to the progressive sector.

e. by raising prices in all sectors.

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An observational study provides a biased estimate of the true effect of a treatment on a medical
outcome because:
 a. no one wants to serve as a guinea pig for randomized trials.

b. it is difficult to find a control group that is equivalent to the treatment group.

c. everyone wants to be in the treatment group.

d. the treatment group and the control group are too similar.

e. the treatment and control groups are randomly selected.

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Randomized sampling is not feasible in many policy studies, so researchers turn to different
strategies to estimate causality from observational data. One such approach is difference-in-
differences (DiD). Which of the following statements best describes DiD?
a. DiD is the only approach that uses data from individuals in both groups that are exposed to the treatment.

b. The convenient feature of DiD is that the two groups do not need to experience similar trends in the outcome

variable during the pretreatment time period.

c. DiD uses differences in individual characteristics to divide the data into two groups.

d. DiD is a hybrid approach that utilizes a cross-section of individuals across time to measure differences.
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The major difference between propensity score matching and synthetic control is that:
a. propensity score matching is an application of the methodology used in the comparative case study.

b. the way in which the control groups are identified is different.

c. propensity score matching requires the researcher to identify qualified donor pools in choosing a control group.

d. synthetic control uses logit regression to match individuals in the treatment group with individuals with similar

characteristics to create a control group.

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If a hospital is experiencing economies of scale,:
a. quality is falling as output is rising.

b. it should reduce its output level to lower costs.

c. prices are obviously too high.

d. its average cost curve is negatively sloped as output increases.

e. its average cost curve is positively sloped as output increases.

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The optimal level of output may be defined as that level of output where:
a. average benefit exceeds average cost by the greatest amount.

b. the marginal benefit of the last unit purchased equals its marginal cost.

c. it is impossible to define optimal in any meaningful way.

 d. marginal benefit exceeds marginal cost by the greatest amount.

e. total benefit equals total cost.

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Inoculation programs against certain diseases such as small pox, polio, and whooping cough create:
a. nonexcludable goods.

b. public goods.

c. external costs to society equal to the costs of the program.

d. positive externalities in consumption.

e. nonrival goods.
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When a physician knows more about alternative treatments than her patients do, we say that
_______ exists.
a. adverse selection

b. perfect information

c. moral hazard

d. rational ignorance

e. asymmetric information
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