TEST 1

Test One is worth 15 points.  Each of the three questions below is worth 5 points.  You need to answer all 3 questions.  It is expected that it would take you at least one single spaced typed page to answer a question.  (Assuming one inch margins and 12 pt font.)  All answers must be in one Word file.  Handwritten work scanned into a Word document is not acceptable.  Please be sure to provide citations for your sources.  If you have not read the Rubric for Grading and Directions for Submitting Tests please do so.  They are just above this test.  

If you have technical difficulties uploading your file to this test, please contact the Open SUNY Helpdesk.  I will accept Test One up to 48 hours late.  If on the test due date, you are working later than the Helpdesk is open and have a problem, do not panic.  Just contact the Open SUNY Helpdesk the next day for assistance in uploading your file. If you use up the 48 hour grace period in writing the exam and then cannot get it to load or have some other issue, I am sorry but you will have a 0 on test one.  It is up to you to submit the correct file in the correct format to this exam.  Your file has to be a .doc or .docx file.  You can go in and view what you submitted to be sure it went through and you submitted the file you wanted to.  

Please remember that the penalty for any violation of the SUNY Canton Academic Integrity Policy will result in an F for you in the course.  If you need to review the Academic Integrity Policy, it is available on the college’s website.  I strongly encourage you to do so.  Ignorance will not be a defense if you violate the policy.  By submitting your answers to this test you are acknowledging that you were made aware of the Academic Integrity Policy, advised to review it and understand the penalty for a violation in this course.  In addition, please remember the course policy (located on the syllabus) concerning the use of quotes.  A series of quotes does does not make for a well written answer.  Quotes should only be used if the exact phrasing of the author is required in your answer.  For answers on this exam, the exact wording of an author is not needed.  The misuse or over use of quotes will significantly reduce your grade.
Once you have written your answers to this exam and have them saved all in one Word .doc or .docx file, to upload the test you will need to come back to this area and click on the T1 that is above. 

Question 1 
There are four major methods of economic evaluation used in health care decision making.  The four methods are cost of illness studies, cost-benefit analysis, cost-utility analysis and cost-effectiveness analysis.  Please note that your textbook treats cost-utility analysis as a special form of cost-effectiveness analysis.  You have been assigned to evaluate a new diabetes medication.  Write an essay in which you address the following four questions.
Which of the four types of economic evaluation would you use to perform your evaluation? 
What advantages does the type of evaluation you selected have over the other three for this study? 
What are some of the disadvantages or limitations of the evaluation you selected?   
What information would you need to gather to perform your evaluation? 

Question 2 
Answer the following true/false questions by stating if the statement is true or false and by providing an explanation for the answer you gave.  Your explanation should be detailed enough so that it establishes not only is your answer correct but that the opposite answer would be incorrect.   All points for the true/false questions will be given for the explanation.
A. Lowering the legal age to purchase beer would increase the supply of beer.  (T or F)
B. Increasing the price of beer would decrease the quantity demanded of beer.  (T or F)
C. If a new excise tax of $10.00 is levied on suppliers of kegs of beer, consumers will end up paying $10.00 more per keg.  (Assume an upward sloping supply curve and a downward sloping demand curve.  T or F)
Refer to the table below to answer the following questions.
Price $
Quantity Demanded Kegs
Quantity Supplied Kegs
10
900
20
50
600
100
100
400
400
150
300
900
200
0
1300
D.  A surplus of 500 kegs would exist at a price of $50.  (T or F)
E.  A price ceiling of $150.00 would cause a shortage of kegs.  (T or F)
Question 3
Demand studies in health care have provided estimates of both income and price elasticity.  Estimates of income elasticity are usually above +1.0.  Estimates of price elasticity typically range between -0.1 and -.75 (with hospital services at the lower end and elective services at the upper end).  Write an essay in which you discuss what information these estimates convey and what the significances of these estimates are to policy makers and private health insurance companies?