Sample Final Exam Answers

Sample Final Exam Answers - VERSION B NAME:_ANSWER KEY_...

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VERSION B 1 NAME:_______ANSWER KEY______________________________ Health Economics Final Exam, Georgia State University, Rashad Thursday, May 1st, 2008, 5-7pm Please put all answers on the question sheet. You have two hours to finish the test. You may use your textbook, notes, and handouts in answering. Please use full sentences when answering. Best of luck. For questions 1-3, consider the following, taken from Exhibit 1 of Pauly’s article (Reading 9), where the dependent variable is the change in profit rates and the main independent variable is either the number of HMOs (first column) or the HMO Herfindahl Index (second column): 1. (4 points) What does the HMO Herfindahl Index refer to? The HMO Herfindahl Index refers to how concentrated the HMO market is – that is, the higher the Herfindahl Index, the more monopolized (and characteristic of an oligopoly) Health Maintenance Organizations are. 2. (4 points) According to economic theory, is it more desirable to have a low Herfindahl Index or a high one? According to economic theory, it is more desirable to have a LOW Herfindahl Index. (Partial credit is given if you said that a high one is more desirable from an individual firm’s standpoint, as profits would be higher. Yet note that in economic theory, one of the assumptions is having no market power for an efficient solution.) 3. (4 points) What effect (focus on sign and significance rather than the magnitude of the value) does having a high HMO Herfindahl Index have according to the above table? What does this mean (i.e., what implications does this have)? According to the table and the reading, having a high HMO Herfindahl Index reduces competition and INCREASES PROFIT RATES.
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VERSION B 2 4. (4 points) Consider the following, taken from Table 4 of Town’s article (Reading 10), where the dependent variable is the logarithm of advertising: What impact does having more Medicare recipients in the area having on hospital advertising? What impact does having more Medicaid recipients in the area having on hospital advertising? Having more Medicare recipients in an area SIGNIFICANTLY INCREASES
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This note was uploaded on 02/20/2010 for the course ECON 4210 taught by Professor Rashad during the Spring '10 term at Georgia State.

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Sample Final Exam Answers - VERSION B NAME:_ANSWER KEY_...

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