Are there any consequences to a firm in an industry if it raises prices to pass

Question

Are there any consequences to a firm in an industry if it raises prices to pass on higher health insurance costs?

A. No, as long as the firm’s products are heavily advertised

B. No, because consumers are generally not very price sensitive, particularly when prices increase by a small percentage

C. Yes, because the health insurer will raise premiums even higher given that the firm can simply increase its prices to pay the higher premiums

D. Yes, because firms have competitors—either other firms in the industry or manufacturers in other countries; thus, the firm will lose sales

Explanation / Answer

Solution: Yes, because firms have competitors—either other firms in the industry or manufacturers in other countries; thus, the firm will lose sales

Explanation: The increased competition among health systems, hospitals, and insurers can impact patient outcomes, when a firm in an industry increases prices and pass on higher health insurance costs.

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