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Healthcare economics questions
Identify the letter of the choice that best completes the statement or answers the question.
1. Prairie Cabinets produces and sells custom kitchen cabinets. The firm has determined that if it hires 10 workers, it can produce 10 sets of cabinets per day. If it hires 11 workers, it can produce 12 sets of cabinets per day. It sells each set
of cabinets for $2,000, and it pays each of its workers $200 per day. Which of the following is correct?
a. For the 11th worker, the value of the marginal product of labor is $400.
b. For the 11th worker, the value of the marginal product of labor is $4,000.
c. The firm should not hire the 11th worker since hiring this worker reduces profit.
d. In order to justify hiring the 11th worker the firm will need to raise the price of a set of cabinets.
2. The following table shows the number of calculators that can be assembled per week by various numbers of workers. If the price per calculator in a perfectly competitive product market is $8, how many workers would the firm employ if the weekly wage rate is $800?
Quantity of Number
of Calculators
Labor Per Week
0 0
1 200
2 360
3 480
4 560
5 600
a. 1
b. 2
c. 3
d. 4
3. Factory workers who work the day shift earn less per hour than similarly-skilled factory workers who work on the night shift. The difference in pay is attributed to
a. the marginal product of labor.
b. the marginal product of capital.
c. diminishing marginal returns.
d. a compensating differential.
4. Other things equal, a particular job will likely pay a higher wage if it involves
a. danger to the worker.
b. personal enjoyment for the worker.
c. intellectual stimulation for the worker.
d. All of the above are correct.
5. Public school teachers are known to have low wages. This is probably because
a. public school teacher jobs are easy.
b. public school teachers are required to be college graduates.
c. public school teachers need very little money to live.
d. many people perceive the job of public school teacher to have a high element of personal satisfaction.
6. In recent years, the ratio of earnings of the typical U.S. college graduate to the earnings of the typical high school graduate without additional education has
a. risen as the demand for skilled labor has increased relative to the demand for unskilled labor.
b. risen as the demand for skilled labor has decreased relative to the demand for unskilled labor.
c. fallen as the demand for skilled labor has increased relative to the demand for unskilled labor.
d. fallen as the demand for skilled labor has decreased relative to the demand for unskilled labor.
7. Which of the following statements is not correct?
a. Both the human capital theory and the signaling theory of education could explain why college graduates earn more than high school graduates.
b. The signaling theory of education suggests that the ability to complete a college degree is correlated with the ability to perform well in the labor market.
c. If the human capital theory of education is correct, a government policy that pays for additional schooling for all workers would not increase wages.
d. If the signaling theory of education is correct, a government policy that pays for additional schooling for all workers would not increase wages.
8. Which of the following statements is correct?
a. Compensating wage differentials reflect different skills of workers.
b. Efficiency wages are equal to the marginal productivity of workers.
c. The signaling theory of education suggests that schooling does not affect worker productivity.
d. The superstar phenomenon explains why more talented entertainers earn more than less talented entertainers.
9. If the demand curve for beef shifts to the right, then the value of the marginal product of labor for butchers will
a. rise.
b. fall.
c. remain unchanged.
d. rise or fall; either is possible.
Labor Output Marginal Product of Labor Value of Marginal Product of Labor Wage Marginal Profit
0 0 — — — —
1 400 400 $1200 $400 $800
2 700 300 $
900 $400 $500
3 950 250 $
750 $400 $350
4 1050 100 $ 300 $400 -$100
10. Refer to Table .The price of output is:
a. $1.
b. $2.
c. $3.
d. $400.
11. Refer to Table above. How many workers should the firm hire?
a. 1
b. 2
c. 3
d. 4
12. Suppose the government implemented a negative income tax and used the following formula to compute a family’s tax liability: Taxes owed = (1/3 of income) – $15,000. A family earning $60,000 before taxes would have how much after-tax income?
a. $5,000
b. $15,000
c. $55,000
d. $65,000
13. Which of the following statements is correct?
a. A disadvantage of a minimum-wage law is that it may benefit unskilled workers who are not low-income workers.
b. A disadvantage of a negative income tax program is that a poor person who chooses not to work many hours would receive a cash benefit.
c. A disadvantage of an Earned Income Tax Credit (EITC) is that a person who is unable to work due to a disability does not benefit from the program.
d. All of the above are correct.
14. Economists who support minimum-wage legislation are likely to believe that the
a. demand for unskilled labor is relatively inelastic.
b. demand for unskilled labor is relatively elastic.
c. supply of unskilled labor is relatively elastic.
d. supply of unskilled labor is relatively inelastic.
15. Which of the following statements illustrates diminishing marginal utility?
a. An extra dollar of income to a poor person provides that person with more additional utility than does an extra dollar to a rich person.
b. An extra dollar of income to a poor person provides that person with less additional utility than does an extra dollar to a rich person.
c. An extra dollar of income to a poor person provides that person with the same additional utility as does an extra dollar to a rich person.
d. An extra dollar of income to a poor person provides that person with the same total utility as does an extra dollar to a rich person.
16. Adverse selection–buyers of life insurance will likely have higher than the average death rates– because
a. An insured person may engage in riskier behavior than do people who are not insured.
b. Those with higher risk of death are more likely to want to buy insurance.
c. The price of life insurance will likely reflect the costs of a riskier-than-average person.
d. Third party pays means the insured does not bear the costs.
17. If the idea of insurance is to share the risks of bad outcomes, in what sense does insurance share the risks.?
a. Assuming randomness of bad outcomes in a group, the probability of bad outcomes can be calculated, and insurance premiums set to cover the groups costs.
b. Insurance transfers the risks from those individuals willing to bear it to those who are unwilling to.
c. Insurance transfers the costs to the young and healthy from the old and sick.
d. All are true.
18. How does adverse selection affect the ability of insurance companies to provide the benefit of risk sharing?
a. Insurance companies know more than the insured about its outcomes.
b. The individual thinks healthcare is a free good because it is paid for by a third party.
c. The probability of bad outcomes in a group is likely to be higher and less likely to be random.
d. All the above.
19. What is the adverse selection death spiral that might lead to the collapse of the healthcare insurance market?
a. Insurance premiums will be set to high.
b. Premiums will be set too low.
c. It will cause healthy individuals to leave the group.
d. Both a and c.
e. Both b and c.
20. Critics of food stamps argue that low income should be given cash payments rather than food vouchers. What are their arguments?
a. They would rather spend it on drugs.
b. The outcome is the same whether or not you give them food stamps or cash.
c. Low income know better what they need.
d. Both a and b.
e. Both b and c.
21. A monopolistically competitive firm can raise its price somewhat without fear of losing all of its unit sales because of:
A. Brand loyalty.
B. Economies of scale.
C. Inelastic Demand.
D. Large market shares of firms in the market.
22. Equilibrium quantity in markets characterized by oligopoly are
A. lower than in monopoly markets and higher than in perfectly competitive markets.
B. lower than in monopoly markets and lower than in perfectly competitive markets.
C. higher than in monopoly markets and higher than in perfectly competitive markets.
D. higher than in monopoly and lower than in perfectly competitive markets.
23. A situation in which economic actors interacting with one another each choose their best strategy given the strategies the others have chosen is called a(n)
A. socially optimal solution.
B. Nash equilibrium.
C. competitive equilibrium.
D. open market solution.
24. Use the information below to answer the following questions.
Two discount superstores (Ultimate Saver and Super Duper Saver) in a growing urban area are interested in expanding their market share.
Both are interested in expanding the size of their store and parking lot to accommodate potential growth in their customer base. The following game depicts the strategic outcomes that result from the game. Growth related profits of the two discount superstores under two scenarios are reflected in the table below.
Ultimate
Saver
Super Duper Saver Low
High
High SD-$275,
US-$35 SD-$65, SD-$65
Low SD-$135,
US-$135 SD-$35, US-$275
25. What is the outcome of a non repetitive non cooperative Nash equilibrium?
a. SD-275,
US-35
b. SD135,
US-135
c. SD-65,
US-65
d. SD-35,
US-275
26. Noncooperative outcomes typically imply an outcome
A. that is worse for both parties to the game.
B. that is better for both parties to the game.
C. in which society is always worse off.
D. in which society is always better off.
27. If instead of a non repeating game the game is repeating what outcome would you expect?
A. SD-275, US-35
B. SD135,
US-135
C. SD-65,
US-65
D. SD-35,
US-275
28. True or False: If MUX/PX exceeds MUY/PY, then a household can increase its utility by spending more on X and lesson Y.
29. Problem
Consider the following data describing the change in Johnny’s utility when he consume various levels of apples and grapefruit. The price of apples is $0.50,and the price of grape fruit is$1.00.
Q apples
TU Apples Q Grapefruit TU Grapefruit
0 0 0 0
1 10 1 25
2 18 2 40
3 25 3 53
4 30 4 63
5 34 5 68
6 37 6 71
7 39 7 73
8 40 8 74
Johnny’s mother sends him to the store with $6.00 to spend on apples and grapefruits, and says Son, spend all the cash and be sure to maximize your utility. What will Johnny purchase? Explain.
II. Short Answers
Answer the following in a few sentences:
30. Explain why the following situation is likely to persist: soccer players in Europe are the highest paid athletes and in the US they are among the lowest paid athletes.
31.Explain why wage discrimination is not a profit maximizing strategy in a competitive industry.
31. Using the theory of wage determination, explain why wages in developing countries, where levels of capital are small, are typically quite low.
