Multiple Choice Quiz


1	Prescription drugs account for ______ of health care spending
		A)	more than half
		B)	about one-third
		C)	just under one-tenth
		D)	less than 1%


2	If a company has a patent on a drug that treats a particular disease
		A)	they are the only ones who can sell a drug that treats that disease.
		B)	they are the only ones who can sell that drug while the patent is in force (usually about ten years after approval).
		C)	they are the only ones who can ever sell that drug.
		D)	other companies can make the same drug but they can't use the same name.


3	Orphan drugs are designed to treat
		A)	orphans only.
		B)	diseases that are common among orphans but that others get too.
		C)	diseases that affect large numbers of people.
		D)	diseases that affect small numbers of people.


4	The existence of patents suggest that there is
		A)	monopoly power.
		B)	perfect competition.
		C)	low prices.
		D)	corruption in the system.


5	The deadweight loss is an economist's measure of
		A)	the cost to society of drugs killing people.
		B)	the cost to society of drugs that could have saved people had they been approved in time.
		C)	the cost to society associated with production being too little or too great.
		D)	the cost to producers of lawsuits emanating from drugs that kill people.


6	With prescription drugs there is a trade-off between
		A)	the benefits of low prices caused by allowing patents on drugs and profits to drug companies.
		B)	the benefits of motivating innovation with patents (and high prices) and the ability of people to afford those drugs.
		C)	the benefits of motivating innovation by allowing generic substitutes and drug company stock prices.
		D)	the benefits of low price and high quality because there is no standard approval process.


7	The "opportunity cost" argument advanced by drug companies centers on the fact that money invested in drugs
		A)	yields a lower return than other investments.
		B)	yields a quicker return than other investment.
		C)	yields a return that will occur much later than other potential investments.
		D)	is risky.


8	The costs of creating prescription drugs are naturally higher than their production costs because of
		A)	high innovation costs.
		B)	high levels of uncertainty in terms of which potential drugs will be effective.
		C)	the high opportunity cost of investments because of the long time delay between the investment and the return.
		D)	all of these contribute to high costs.


9	Economists generally agree that prescription drug
		A)	price controls would stimulate world-wide innovation.
		B)	price controls would lower rates of return to drug companies.
		C)	price controls would diminish world-wide innovation.
		D)	b) and c)


10	The FDA approval process must balance the risks of
		A)	approving a drug too late (thereby putting people at risk for unknown side-effects) and approving a drug too early (thereby denying effective treatment to people).
		B)	approving a drug too late (thereby lengthening the patent) and approving a drug too early (thereby putting people at risk for unknown side-effects).
		C)	approving a drug too late (thereby denying effective treatment to people) and approving a drug too early (thereby putting people at risk for unknown side-effects).
		D)	approving a drug too late (thereby denying effective treatment to people) and approving a drug too early (thereby shortening the patent).

2003 McGraw-Hill Higher Education
Any use is subject to the Terms of Use and Privacy Policy.
McGraw-Hill Higher Education is one of the many fine businesses of The McGraw-Hill Companies.