Consider the assumptions of the perfectly competitive market (below is a version

Question

Consider 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)? 1) Consumer and producer sovereignty: What is produced is determined by what people want and are able to buy. No one individual or group (such as the government) dictates what must be produced or purchased. No one limits the range of choices. 2) There is complete and easily attainable information about products and preferences. 3) There are many producers making and selling the same product. There is free entry into the market and free exit out of the market, which leads to zero economic profits in the long run. 4) There are many consumers potentially buying that product. 5) Prices are a signal to producers (how much to produce) and consumers (how much to buy). 6) Prices are also a means of rewarding popular decisions by producers. The most efficient producers prevail, the least efficient perish. 2) There is complete and easily attainable information about products and preferences.

Explanation / Answer

Market for health care is not a perfectly competitive market. It doesnt have the below mentioned features:

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