onsider the assumptions of the perfectly competitive market (below is a version
ID: 2444076 • Letter: O
Question
onsider the assumptions of the perfectly competitive market (below is a version of the assumptions re-organized from the class slides). Based on your reading of the article "The Bitter Pill" and the class "Markets" slides, it is clear that the market for health care does not meet all of the criteria of a perfectly competitive market. Which violation do you think most distorts the market for health care. Describe how the health care industry violates the assumption and discuss the consequences (on quantity, prices, profits, quality)? 6) Prices are also a means of rewarding popular decisions by producers. The most efficient producers prevail, the least efficient perish.
Explanation / Answer
Following conditions of perfectly competitive maket are violated in healthcare segment:
These distortions lead to the overpricing of products. Customers tend to pay extra price for its products. there shall be fall in the quantity and profits of these firms are likely to witness upward movements.
higher price signals to producer to increase supply while suggests to buyers to reduce its demand. Demand and supply forces decide the price level if these are allowed to act freely. Only efficient firms would be able to survive in long run. Efficient firms can reduce their price, according demand and supply conditions. While inefficient firms can not adjust so quickly, hence likely to perish.
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