Econ exam 2.2 11-20

Price Transparency

Ability to know costs upfront (very low in U.S. system).

Negotiated Prices

Prices set between insurers and providers—not by open market.

Externality

Impact on third parties not directly involved.

Positive Externality

Benefits others (vaccines, healthy workforce).

Negative Externality

Costs others (smoking, obesity).

Asymmetric Information

One party has more knowledge (doctor > patient).

Information Gap

Patients lack knowledge to make optimal decisions.

Lack of Transparency

Consumers cannot easily compare prices or quality.

Adverse Selection

High-risk individuals are more likely to buy insurance.

Adverse Selection Problem

Healthy people drop out → premiums increase → system worsens.