QUESTION 1 ON a graph that has risk probability on the vertical axis and fullnes

Question

QUESTION 1

ON a graph that has risk probability on the vertical axis and fullness of insurance on the horizontal access (on the origin, person is uninsured. As one moves gradually to the right, insurance starts becoming available from small benefits, to better and better benefits. The endpoint of the horizontal axis is full coverage insurance where insured does not have any out of pocket costs).

The "probability of risk lines" slope up, What observations can we make from this graph?

Here, insurance does not create a moral hazard.

Here insurance creates a moral hazard

moral hazard increases the probability of the risk

b and c

3 points   

QUESTION 2

In addition to the previous question, assume 2 probability of risk lines pertaining to two different individuals. Justise' probability of risk line is higher than Hasan's probability of risk line. What can you conclude?

Justise

Hasan

Justise

a and b

a and c

3 points   

QUESTION 3

From the previous question which of the following is true?

Hasan

Hasan creates a lower social loss than Justise

The level of social loss from both are exactly equal

none of the above

3 points   

QUESTION 4

If the medical quantity demanded is preventative care, then

increase in its demand due to moral hazard will provide even greater social losses to society than if it was a regular medical procedure (no preventative quality)

increase in its demand due to moral hazard will provide less social losses to society than if it was a regular medical procedure (no preventative quality)

increase in its demand due to moral hazard will provide the same social losses to society than if it was a regular medical procedure (no preventative quality

all of the above

none of the above

3 points   

QUESTION 5

An example of "Evergreening" is

organic

prolonging patents by applying for a patent for a drug that contains a 95% change in the chemical structure of a patented product and applying for a patent for it as a new drug. .

prolonging patents by applying for a patent for a drug that contains a 95% change in the basic chemical structure of a patented product and applying for a patent for it as a new drug. .

prolonging patents by applying for a patent for a drug that contains a very small change in the basic chemical structure of a patented product and applying for a patent for it as a new drug. .

Direct to consumer advertising

3 points   

QUESTION 6

Why did the Indian Supreme Court decide against the appeal for an Indian patent by the Swiss pharmaceutical companies application by Novartis for Glivec?

because Indian regulators most likely will not be able to fully protect the patent if approved

because Indian regulators will not be able to allow pharmaceutical companies to sell at high prices

indian

all of the above

a and b

3 points   

QUESTION 7

Direct to Consumer Advertising by pharmaceutical companies is allowed in which of the following countries?

UK

Italy

Canada

New Zealand

Germany

3 points   

QUESTION 8

Which of the following is true?

the rate of increase in medical CPI is higher than the rate of increase of the country's overall CPI

the rate of increase in medical CPI is lower than the rate of the increase of the country's overall CPI

the rate of increase in medical CPI is the same as the rate of increase of country's overall CPI

none of the abvoe

3 points   

QUESTION 9

orphan drug is a drug with

more than 1 million possible target patients

more than 200,000 possible target patients

less than 200,000 possible target patients

drugs which can only be used for patients that have lost their parents

3 points   

QUESTION 10

Price discrimination occurs when

different drugs are sold in different places at different prices.

different drugs are sold in different places at the same prices.

the same drugs are sold in different places at the same prices.

the same drugs are sold in the same place places at the same prices.

the same drugs are sold in different places at different prices.

3 points   

QUESTION 11

Without insurance price of the drug is $500. Quantity demanded was 1,000. With insurance (Coinsurance rate is 10%) demand increases to 1,400. What is the social loss due to insurance?

$180,000

$90,000

$450

cannot be determined

a.

Here, insurance does not create a moral hazard.

b.

Here insurance creates a moral hazard

c.

moral hazard increases the probability of the risk

d.

b and c

Explanation / Answer

Answer 1

As risk probability line occurs at vertical axis and fullness of insurance on the horizontal axis, thus with the increase in risk coverage the probability of risk also increases and at the extremes risk probability is 1 (on the vertical axis) and the person is also fully insured.

Now as the person is fully aware that the insurance company will bear the full amount of expense of loss if he is fully insured thus the moral hazar will be highest at the risk probability of 1. Also moral hazar increases with the increase in insurance coverage and in turn increases the probability of risk.

Hence the correct answer is part (d) i.e. insurance creates a moral hazard as well as moral hazard increases the probability of the risk.

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