Multiple Choice Questions:
1. Insurance
a. Increases the price of health care to patients and decreases the quantity of services demanded.
b. Decreases the price of health care to patients and decreases the quantity of services demanded.
c. Increases the price of health care to patients and increases the quantity of services demanded.
d. Decreases the price of health care to patients and increases the quantity of services demanded.
2. When insurance increases the likelihood that an individual will engage in risky behavior, it is known as
a. Moral hazard.
b. Adverse selection.
c. Risk selection.
d. The lemon problem.
e. Both b and d.
3. To reduce the problem of moral hazard, health insurance companies could
a. Decrease required deductible payments.
b. Increase required deductible payments.
c. Increase required copayments.
d. Do both b and c.
4. Adverse selection
a. Arises in situations where there is asymmetric information.
b. Arises because the unhealthy are more likely to purchase health insurance than are the healthy.
c. Problems can be reduced by insuring entire employee groups, rather than individual applicants.
d. Is characterized by all of the above.
5. Health insurers can reduce adverse selection problems by
a. Insuring entire groups.
b. Requiring physical exams as a condition of purchase.
c. Limiting the period of open enrollment in health insurance.
d. Doing all of the above.
6. Since 1960 the elderly proportion of the population has _____________ and in the next two decades is expected to _____________.
a. Increased; decrease
b. Increased; increase
c. Decreased; decrease
d. Decreased; increase
7. With traditional indemnity insurance coverage,
a. Patients must choose physicians from a limited network.
b. Patients can freely choose physicians.
c. Patients typically pay nothing out of pocket for medical care.
d. Both a and c are correct.
e. Both b and c are correct.