Question : 5.3   Information Problems and Externalities in the Market for Health : 1388200

5.3   Information Problems and Externalities in the Market for Health Care

1) In the market for insurance,

A) buyers often have more information than sellers.

B) sellers often have better information than buyers.

C) sellers are protected from lawsuits brought by buyers.

D) demand is perfectly inelastic because, by law, home owners and automobile drivers must have insurance.

2) What is the term that describes a situation in which one party to an economic transaction has less information than the other party?

A) inefficient market hypothesis

B) asymmetric information

C) unequal market structure

D) monopsony

3) Pricing insurance policies is made difficult because buyers have more information than sellers. This difficulty is an example of

A) moral hazard.

B) adverse selection.

C) asymmetric information.

D) the free rider problem.

4) The Pre-Existing Condition Insurance Plan is a federally administered part of the Affordable Care Act, and is designed for people with pre-existing medical conditions to obtain insurance. By offering health insurance to all U.S. citizens with pre-existing medical conditions, the Pre-Existing Condition Insurance Plan

A) eliminates asymmetric information for the insurer, but not for the insured.

B) eliminates asymmetric information for the insured, but not for the insurer.

C) eliminates asymmetric information for both the insurer and the insured.

D) reduces, but does not eliminate,, asymmetric information for both the insurer and the insured.

5) In the United States, the bulk of health care spending is paid by health insurance companies. Such a system is also called ________ where consumers of health care pay a nominal fee and the rest are paid by the health insurance provider.

A) universal health care system

B) third-party payer system

C) socialized medicine system

D) single=payer system

6) Consumers usually pay less than the total cost of medical treatment because

A) a third party, usually an insurance company, often pays most of the bill.

B) the federal government pays for most medical procedures.

C) competition forces doctors and hospitals to charge prices that do not cover their costs.

D) a third party, usually an employer, often pays most of the bill.

7) If a hospital knows that an insurance company will pay for most of a patient’s bill, the hospital has more of an incentive to require additional medical procedures and tests, even if the patient may not require them. This is an example of 

A) moral hazard.

B) the principle-agent problem.

C) asymmetric information.

D) adverse selection.

8) The principal-agent problem is a problem

A) caused by a person (principal) who hires an agent to act on his behalf but is unwilling to delegate authority to the agent to carry out the task in the best possible way.

B) caused by agents pursuing their own interests rather than the interests of the principals who hired them.

C) of the power system of boss and subordinate where the boss (principal) exerts influence over his subordinates (agents) using punishment or threat. 

D) that exists when a person (principal) has more information about the task than the agent he hires to perform the task.

9) In the principal-agent relationship, the principal is

A) the owner of a resource that has hired a third party to act in the best interest of that third party.

B) the person who is placed in control over resources that are not his own, with a contractual obligation to use these resources in the interests of some other party.

C) the person who is placed in control over resources that are not his own and agrees to compensate the resource owner in the event of outcomes that do not satisfy the resource owner.

D) the person who places his resources in professional hands in exchange for the professional’s promise to act on the resource owner’s behalf.

10) The study of the problems due to asymmetric information was begun when economists analyzed which type of market?

A) the market for citrus fruit

B) the market for insurance

C) farmers’ markets

D) the market for automobiles