Health Economics
14th Edition
ISBN: 9781137029966
Author: Jay Bhattacharya
Publisher: SPRINGER NATURE CUSTOMER SERVICE
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Chapter 6, Problem 8E
To determine
Check whether the statement is true or false.
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In some countries, such as Canada and UK, direct-to-consumer (DTC) advertising for pharmaceutical products is illegal or tightly controlled. Which of the following is NOT a reason why DTC is tightly controlled?
Question 7 options:
Asymmetric information: consumers are not in a good position to determine if a drug is what they need.
DTC makes patients aware of new remedies.
DTC can put a strain on doctor-patient relationship when patients demand some drugs that are not necessary or not the best options.
DTC have the potential to drive up spending on drugs and exacerbate moral hazard.
True or False. There is no such thing as “too much competition” in the private hospital market. Be sure to justify your answer.
Imperfect competition and moral hazard. Some economists have argued that moral hazard and monopolistic health care markets are two socially inefficient problems that partially cancel each other out.
Relative to the optimal level of health care Q∗, how much health care is provided in the presence of moral hazard? Assume perfectly competitive health care markets.
Relative to the optimal level of health care Q∗, how much health care is provided in the presence of monopolistic health care markets? Assume no moral hazard.
Write a one-sentence defense of the argument that moral hazard and imperfectly competitive health care markets could combine to provide a good level of health care provision Q.
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- The Stark laws (1989 and 1993) ban physicians from referring patients to facilities in which the physician has a financial interest, such as a specialty hospital, radiation lab, or clinical lab. The Stark laws address: the problem of adverse selection. the high standards imposed on the agency relationship between physician and patient. moral hazard on the part of doctors. induced demand by physicians. unethical behavior by patients.arrow_forwardThe Orphan Drug Act of 1983 provides tax incentives, patent protection, and research subsidies to firms for drugs, vaccines, and diagnostic agents if they are intended to treat a disease that affects less than 200,000 citizens. Explain how the Orphan Drug Act would affect drug development. Can you think of any tradeoffs from the act?arrow_forwardExplain the differences among the following three types of government intervention in the health insurance market: (1) public subsidy, (2) mandated insurance benefits, and (3) direct public provision of insurance coverage. If the goal of government intervention is to achieve universal coverage, which strategy is the best (most efficient) in terms of minimizing the deadweight loss?arrow_forward
- Indicate whether each statement is true or false, and justify your answer.There is no such thing as “too much competition” in the private hospital market.arrow_forwardDefine the characteristics of a vulnerable consumer. Considering ethics, should there be greater government regulation with respect to selling to vulnerable consumers? Within the context of a Christian worldview, why should businesses consider the methods of marketing to vulnerable consumers? Be sure to support your responses with evidence from the readings or additional references.arrow_forwardSuppose you are collecting data from a country like Japan where the government sets the price of healthcare. Each prefecture in Japan has a different set of prices (for example, Tokyo has higher prices than rural Hokkaido). Data for 1999 are displayed in the table below. Region Outpatient Visits per Month Price per Visit Tokyo 1.25 25 Hokkaido 1.75 15 (4 points) What is the arc price elasticity of demand for health care consumers in Japan (using only these data)? (4 points) Suppose that incomes are generally much higher in Tokyo than Hokkaido. Is your answer to the last question an overestimate or underestimate of price elasticity? Justify your answer. (c) (4 points) Using your estimated elasticity, what would the demand for health care be if the price in Tokyo were raised to 30 per visit? What would the demand in Hokkaido be if the price were lowered to 5 per visit?arrow_forward
- Indicate whether the statement is true or false, and justify your answer.Physicians have no say in what prices to charge their patients.arrow_forwardIn some countries, such as Canada and UK, direct-to-consumer (DTC) advertising for pharmaceutical products is illegal or tightly controlled. Which of the following is NOT a reason why DTC is tightly controlled? DTC have the potential to drive up spending on drugs and exacerbate moral hazard. DTC makes patients aware of new remedies. DTC can put a strain on doctor-patient relationship when patients demand some drugs that are not necessary or not the best options. Asymmetric information: consumers are not in a good position to determine if a drug is what they need.arrow_forwardQ: allowing healthcare to practice at the top of their licenses would... A: - increase barriers to entry in medical care - make the medical market more competitive - complement continued government socialization of medical care - make medical care less competitve and more likely oligopolyarrow_forward
- Indicate whether each statement is true or false, and justify your answer.If a government wishes to maximize the rate of pharmaceutical innovation, it should offer non-expiring patents to drug companies.arrow_forwardIndicate whether the statement is true or false, and justify your answer.The number of US medical schools decreased drastically between 1900 and 1950.arrow_forwardUse supply and demand concepts to explain why the American Medical Association finds it beneficial to require more strict standards for entrance to medical schoolsarrow_forward
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