Posted: May 1st, 2025

Health Economics

Complete document with citations from Health Economics and Financing 6th Edition, by Thomas E. Getzen and Michael S. Kobernick. May also use examples from Nudge, the Final Edition by Richard H. Thaler and Cass R. Sunstein

University of Miami
Miami Herbert Business School
Department of Health Management and Policy
HMP 684 – Health Economics
Spring/Summer 2024
Practice Exam
Name:
Date:
UM ID:
Carefully complete all the questions below.
1. Mean personal health care spending in 2022 was over $13,000 per person in the U.S. This
would equal about $52,000 for a family of four (about $4,300 per month) and yet most families
believe they consume considerably less health care than the mean cost would imply. How can
this apparent paradox be explained?
2. If good health is “priceless,” why are there prices for doctor visits, hospital stays and drugs?
3. The largest single share of total personal health expenditures in the U.S. comes from:
a. out-of-pocket spending by consumers.
b. private insurance.
c. Medicare.
d. Medicaid.
e. other government programs.
4. US physicians are about 1/3 general practice and 2/3 specialty. In most other developed
nations, the proportions are reversed. Comment on why this might be. Comment on the
potential impact of these proportions on health care costs.
5. If feasible and legal, would hospitals price their services higher where demand is less elastic?
Why or why not?
6. Price elasticity of demand measures the:
a. slope of the demand curve.
b. curvature of the demand curve.
c. price divided by quantity.
d. quantity demanded at one point in time.
e. percentage change in quantity demanded for each 1% change in price.
7. If it were available, a rational and healthy consumer would gladly purchase insurance covering
100% of their health care expenditures. True or false? Why?
8. One of the unusual characteristics of health care is the degree of information asymmetry that is
present in the market. How is this related to the demand for health insurance and its price?
9. The willingness of consumers to pay more than the expected loss to obtain insurance coverage is
an example of:
a. irrational evaluation of risk.
b. the market power of insurance companies.
c. adverse selection.
d. risk aversion.
e. the welfare loss due to insurance.
10. Choice architecture is a government-financed welfare program started under the Obama
administration.
True or False
11. Loss aversion arises because people hate losing more than they like winning. This often results
in inertia and status quo bias. Briefly explain what this means. How does this principle apply to
open enrollment for health insurance?