Question

a) In a typical competitive market (not in health care):how does competition work to promote the efficiency of organizations operating in the market?

b) What are the consequences for an organization (and its employees) that fails to operate efficiently in a competitive market?

c) What are the consequences for a hospital that fails to operate efficiently in the NHS Internal Market?

d) In what ways are the incentives providers face in the NHS system similar to private firms in a competitive industry? In what ways are the incentives different?

Answer 1

ANSWER;

GIVEN THAT:

A. THE COMPETITION WORK TO PROMOTE THE EFFICIENCY:

1. Competitive setup promotes efficiency . In competitive market firms produce at point where price equals marginal cost .

2. This condition enables that maximum number of consumers enjoys the good.

B. THE CONSEQUENCES FOR AN ORGANIZATION:

1. Organization which does not operate efficiently as in competitive market leads to dead weight loss.

2. This means that less number of consumers are enjoying the good.

C. THE CONSEQUENCES FOR A HOSPITAL THAT FAILS TO OPERATE EFFICIENTIY:

1. This will lead to deadweight loss i.e market will not efficiently allocate the good.

2. Lesser number of people will enjoy the services of hospital.