In the United States, the bulk of health care spending is paid by health insurance companies
Such a system is also called a third-party payer system where consumers of health care pay a nominal fee and the rest are paid by the health insurance provider. Why might such a system lead to an inefficient outcome?
A) Consumers fearing that excessive use of health care services may lead to a rise in insurance premiums tend to under-consume health care services.
B) Health insurance companies have an incentive to control cost and therefore tend to deny consumers many cutting edge medical treatments.
C) Consumers have an incentive to over-consume health care services because they pay prices well below the cost of providing these services.
D) Physicians concerned that insurance companies may not approve payments tend not to order expensive tests for their patients.
C
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A bilateral negotiation is a bargaining mechanism in which:
A) a third party or an authority intervenes and decides the prices of the products traded in a market. B) a single seller and a single buyer confront one another with bids and asks. C) multiple buyers bargain with a single seller to determine the trading price. D) multiple sellers bargain with a single buyer to determine the trading price.
Which of the following is the formula used for computing economic profits?
A) economic profits = total revenue - implicit costs B) economic profits = total revenue - (implicit costs + explicit costs) C) economic profits = total costs - total revenue D) economic profits = total revenue - explicit costs