MHA 710 - HEALTHCARE ECONOMICS -

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MHA 710 - HEALTHCARE ECONOMICS -

EXAM 3

WITH CORRECT SOLUTIONS.

In order to be a successful price discriminator, a provider must have a degree of market power (depicted by a downward- sloping demand curve) and meet what other condition(s)?

• Customers cannot know that different prices are being

charged.

• Markets must be segmentable, identifying differences in

ability to pay.

• Demand for services must be relatively price elastic.
• Profitable service expansion opportunities must be limited.
• The provider must have excess capacity to accommodate

the extra business. - correct answer- b. Markets must be segmentable, identifying differences in ability to pay.

Legislation considered by Congress to restrict legal immigration

would:

• surprise many policymakers because Congress finds it

difficult to agree on much of anything regarding immigration.

• improve employment prospects for native-born Americans.
• have little effect on medical markets, as so few physicians

practicing medicine in the United States are foreigners.

• raise the costs of operating in many of the nation's rural and

inner-city hospitals. 1 / 4

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• allow more Americans trained abroad to compete for

openings in United States' residency programs. - correct answer- d. raise the costs of operating in many of the nation's rural and inner-city hospitals.

Physicians who own their own diagnostic testing facilities tend to order more tests, charge higher fees for them, and have higher total bills to patients. This practice of self-referral is an

example of:

• cognitive dissonance.
• physician-induced demand.
• moral hazard.
• adverse selection.
• res ipsa loquitur. - correct answer- b. physician-induced

demand.

Which of the following statements is true concerning the trend in community hospital care between inpatient and outpatient services since the mid-1980s?

• Both inpatient and outpatient services have been declining.
• There has been no noticeable trend in either inpatient or

outpatient services.

• Both inpatient and outpatient services have been growing.
• Outpatient services have been growing, while inpatient

services have been declining. 2 / 4

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• Outpatient services have been declining, while inpatient

services have been growing. - correct answer- d. Outpatient services have been growing, while inpatient services have been declining.

The amount that Medicare pays a hospital for treating a

Medicare patient is determined:

• at the point when the diagnosis is made.
• at the time of admission to the hospital.
• before the patient sees a physician.
• after the hospital bill is reviewed by Medicare auditors.
• after medical services are provided. - correct answer- a. at

the point when the diagnosis is made.

Compared to the not-for-profit organizational form, the for-profit environment

• allows for the transfer of assets.
• lacks a profit motive.
• gives shareholders higher returns on their investment
• provides patients with higher quality of care.
• does not provide charity care. - correct answer- a. allows for

the transfer of assets.

What is the most significant cost of attending medical school? 3 / 4

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• Books and incidentals
• Room and board
• Tuition and fees
• The income foregone - correct answer- d. The income

foregone

Using the physician-control model to explain hospital behavior leads to which of the following conclusions?

• Other medical inputs tend to be overused to maximize

physicians' productivity.

• All investment decisions will be based on optimal resource

use.

• The use of operating rooms will be maximized with little

excess capacity.

• Physicians will strive to use the nursing staff efficiently. -

correct answer- a. Other medical inputs tend to be overused to maximize physicians' productivity.

Economies of scale exist when:

• long-run average costs decline as output increases.
• long-run average costs increase as output increases.
• long-run average costs are constant.
• short-run average costs decline.
• short-run average costs increase. - correct answer- a. long-

run average costs decline as output increases.

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