CEBS GBA Exam 2 Study Guide | 305 Questions with 100% Correct Answers | Verified | Latest Update | 150 Pages

What is the basic assumption underlying concept of a free market and how is it challenged by the theory of "bounded rationality?" (Mod 1.1) - Assumption that rational customers will make informed decisions about value, quality and price, while producers who meet consumer's demands will be rewarded with market share and profit. However this is challenged by the consumer's "bounded rationality" - rational consumer is only functional up to a certain point because choices are constrained or bound by limited knowledge and understanding of their choices. What are economic benefits of a free market? (Mod 1.1) - If an individual does not like their provider or health plan, the should be able to "vote with their feet" and select other options. This choice empowers customers, regulates producers and drives efficiency. Describe several ways the US Healthcare market does not function like a normal market. (Mod 1.1) - Healthcare market has significant asymmetry in information between consumers, providers and insurers. Moral hazard is a problem because the marginal cost of covered care is zero, causing some to overconsume medical care. Many consumers choose doctors initially by convenience, accessibility or recommendation. Cost has also been shown to be lower on priority scale for choosing a provider