Student name:__________

MULTIPLE CHOICE - Choose the one alternative that

best completes the statement or answers the question.
1)

Quantity Supplied Price Quantity Demanded The table gives supply and
12,000 $5,000 500 demand data for a certain
10,000 4,000 1,500 elective surgical
procedure. Without health
7,000 3,000 2,800
insurance, the equilibrium
4,000 2,000 4,000
price and quantity would
1,000 1,000 5,200 be

D) $2,000 and
A) $3,000 and 2,800. 11,000.
B) $3,000 and 7,000.
C) $2,000 and 4,000.

2)

Quantity Price Quantity Demanded The table gives supply and

Supplied demand data for a certain
12,000 $5,000 2,000 elective surgical
10,000 4,000 4,000 procedure. If suppliers
7,000 3,000 7,000 provide the quantity of
health care demanded and
4,000 2,000 11,000
insurance pays one-third of
1,000 1,000 16,000
the equilibrium price, the
immediate price to the
consumer and quantity of
health care demanded
would be

D) $1,000 and
A) $3,000 and 7,000. 16,000.
B) $4,000 and 10,000.
C) $2,000 and 11,000.

3)

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 Quantity Price Quantity Demanded
Supplied
12,000 $5,000 12,000
10,000 4,000 15,000
7,000 3,000 18,000
4,000 2,000 21,000
1,000 1,000 25,000
The table gives supply and demand data for a certain elective
surgical procedure. If suppliers provide the quantity of health
care demanded and insurance pays 50 percent of the
remaining equilibrium price after a $1,000 deductible is
satisfied, the quantity of health care demanded will be

C) 18,000.
A) 15,000. D) 21,000.
B) 25,000.

4) The price elasticity of demand for health care is 0.2.

This means that a 15 percent increase in price will induce a

D) 3 percent
A) 30 percent decrease in quantity demanded. decrease in quantity
B) 15 percent decrease in quantity demanded. demanded.
C) 7.5 percent decrease in quantity demanded.

5) Studies in industrially advanced nations indicate that a

3 percent increase in incomes will generate a

demanded.
A) 1 percent increase in the amount of health care D) 6 percent
demanded. increase in the amount of
B) 1.5 percent increase in the amount of health care health care demanded.
demanded.
C) 3 percent increase in the amount of health care

6)

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Quantity Demanded Price Quantity Supplied The table shows the
(units of (units of hypothetical demand and
service) service) supply schedule for health
200 $700 600 care. If there was no health
300 600 500 insurance, the equilibrium
400 500 400 price and quantity of health
500 400 300
care would be
600 300 200
700 200 100
800 100 0

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 D) $500 and 400
A) $600 and 300 units. units.
B) $400 and 400 units.
C) $400 and 500 units.

7)

Quantity Demanded Price Quantity Supplied The table shows the

(units of (units of hypothetical demand and
service) service) supply schedule for health
200 $700 600 care. If private insurance
300 600 500 covers 60 percent of the
400 500 400 equilibrium price, how
500 400 300
much will the insured pay
and what will be their
600 300 200
quantity of health care
700 200 100
demanded?
800 100 0

D) $300 and 600

A) $500 and 400 units. units.
B) $400 and 400 units.
C) $400 and 500 units.

8)

Quantity Price Quantity Demanded The table gives supply and

Supplied demand data for a certain
12,000 $5,000 6,000 elective surgical
10,000 4,000 10,000 procedure. If suppliers
7,000 3,000 12,000 provide the quantity of
health care demanded and
4,000 2,000 15,000
insurance pays 25 percent
1,000 1,000 20,000
of the equilibrium price,
there would be a resulting
allocative

$2,000.
A) efficiency because, at 15,000 units, the marginal B) efficiency
cost to society of $2,000 equals the marginal benefit of because, at 12,000 units,

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the marginal cost to society is $3,000 and the marginal benefit cost to society is $3,000
is $1,000. and the marginal benefit is
C) inefficiency because, at 12,000 units, the marginal $5,000.
cost to society is $5,000 and the marginal benefit is $3,000.
D) inefficiency because, at 12,000 units, the marginal

9)

Quantity Supplied Price Quantity Demanded The table shows the

1,200 $500 50 hypothetical demand and
1,000 400 150 supply schedule for health
care. The efficiency loss
700 300 280
caused by the availability
400 200 400
of health insurance paying
100 100 700 one-half of the cost is

C) $60,000.
A) $200. D) $100.
B) $30,000.

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Answer Key

Test name: Chap 24_22e_Micro_Algo

1) C
In the absence of health insurance, the private
market equilibrium price and quantity will
prevail, found where quantity supplied equals
quantity demanded.
2) C
When health insurance pays a portion of the price of only $2,000
price, the consumer reacts only to the price (the remaining two-
they face, and their quantity demanded will thirds of the $3,000
change accordingly. For example, if the price). This will
equilibrium price and quantity are $3,000 and raise the quantity
7,000 units, respectively, if insurance covers demanded (for
one-third of that price, consumers will face a example, to 11,000).
3) C
When health insurance pays a portion of the value from the
price, the consumer reacts only to the price original price. That
they face, and their quantity demanded will indicates what the
change accordingly. To determine what price consumer pays and
the consumer faces when insurance pays a from there you can
portion of the price after a deductible has been find the
satisfied, first subtract the deductible from the corresponding
equilibrium price. Multiply that value by the quantity demanded.
portion that the insurer pays, and subtract that
4) D

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To find the percentage change in quantity demanded will fall
demand, multiply the price elasticity of by 3 percent (= 0.2
demand by the percentage change in price. For × 15).
example, is price elasticity of demand is 0.2
and the price increases by 15 percent, quantity
5) C
Studies indicate that in industrially advanced percent increase in
nations, the income elasticity of demand for income will result in
health care is +1.0. This means that a given a 3 percent increase
percentage change in income will yield an in the amount of
equal percentage change in the amount of health care
health care demanded. For example, a 3 demanded.
6) D
Equilibrium price and quantity are found at
the price where quantity demanded equals
quantity supplied.
7) D
Equilibrium price and quantity are found at will only face a
the price where quantity demanded equals price of $300 and
quantity supplied. If insurance covers a purchase a higher
portion of that price, consumers will respond quantity demanded
by purchasing the quantity demanded than if they paid the
associated with the price they actually face. full $500.
For example, if the equilibrium price is $500
and insurance covers 60 percent, consumers
8) C

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When health insurance pays a portion of the greater than the
price, the consumer reacts only to the price marginal benefit, a
they face, and their quantity demanded will situation where
fall accordingly. This results in a quantity of there is allocative
health care for which the marginal cost is inefficiency.
9) B
When health insurance pays a portion of the insurance, and then
price, the consumer reacts only to the price by the difference
they face, and their quantity demanded will between the price
fall accordingly. This results in a quantity of the buyer pays and
health care for which the marginal cost is the marginal cost
greater than the marginal benefit, a situation for medical
where there is allocative inefficiency. To providers to provide
measure the size of the efficiency loss (which the last unit of
graphs as a triangle), multiply one-half first by output.
the difference between the equilibrium
quantity and the quantity purchased with

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