Health insurance acts as a buffer between the consumer and cost of health care goods and services. Goods and services cost the consumer less than the charged price because of the presence of health insurance. Because a consumer does not pay the full cost of a good, the consumer may purchase more than goods than he would otherwise purchase without insurance. Providers act as patient’s agent and act in patient’s best interest. Providers may have a financial incentive to act or refrain from acting in a certain way due to insurance arrangements or the lack of insurance. Supplier-induced demand is the provider version of moral hazard. Providers create a demand beyond the amount the well-informed consumer would have chosen. How do we create an alignment of incentives that creates the best possible outcomes for the provider, supplier and the patient?

1. Both Smith and Ricardo believed that, in a competitive market, product prices reflect:

the cost of labor necessary to produce the products.the total costs of all inputs into the products.the effects of trade rather than the costs of inputs.the policies of government toward trade.2.

Adam Smith said that trade freely transacted between countries:

is dangerous because there are no controls on what is exported and what is imported.

generally leads to gains for all countries, so international trade is a positive-sum activity.only benefits a country if that country has an absolute advantage in all products.only benefits a country if that country has a comparative advantage in a specific product.
3. Profiting by buying a product at a specified price in one market and then selling that product in a different market for a higher price is:
illegal in many markets. arbitrage. bartering. common and an easy way to make a profit.

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