1. The U.S. federal income tax is _______, and therefore provides incentives for higher income individuals to purchase _______ amounts of employer-sponsored health insurance

2. a.	progressive; smaller
   b.	regressive; larger
   c.	regressive; smaller
   d.	progressive; larger
   e.	None of the above

3. Which of the following methods has been used by third-party payers to control pharmaceutical costs?

4. a.	Formularies
   b.	Drug utilization review
   c.	Generic substitution
   d.	More than one answer

5. Suppose a manufacturer of artificial hips required any medical care provider to purchase a specific set of surgical tools along with each artificial hip. This would be an example of a _______.

6. a.	exclusive dealing contract
   b.	most favored nation clause
   c.	tying contract
   d.	price ceiling
   e.	both a and b

7. Which of the following statements is/are false?
   1. If a hospital is experiencing diseconomies of scale, it can reduce the average total cost of production by producing a greater quantity of medical services.
   2. If a hospital is cost-minimizing, then the marginal productivity per dollar spent on physicians must be equal to the marginal productivity per dollar spent on nurses.
   3. Short-run average variable costs decrease initially, but then begin to rise due to diminishing marginal productivity of labor.
   4. Previously paid sunk costs do not factor into most decisions since they cant be recouped.
8. Which of the following statements is/are false?
   1. Drug-utilization reviews are used by third-party payers to rein in costs.
   2. High profits in the pharmaceutical industry may be a reflection of the greater risk incurred due to large research and development costs.
   3. The U.S. government decreases competition within the pharmaceutical industry through the issuing of patents.
   4. Unconstrained physicians are more inclined to prescribe brand-name instead of generic products because they are unaffected financially by the drug choice.
9. Which of the following statements is/are false?
   1. In the long-run, economic profits will be zero in monopolistic competition.
   2. If the market price is greater than the marginal cost, a profit-maximizing firm will choose to produce less.
   3. A decrease in the demand for medical care will cause the real hourly wage of physicians to increase.
   4. An increase in consumer income will lead to an increase in the quantity of medical care supplied.