The Fiesta Health Plan Prices Its Products in Such a Way

question 10

Multiple Choice

The Fiesta Health Plan prices its products in such a way that the rates for its products are reasonable, adequate, equitable, and competitive. Fiesta is using blended rating to calculate a premium rate for the Murdock Company, a large employer. Fiesta has assigned a credibility factor to Murdock. Fiesta has also determined that Murdock's manual rate is $200 PMPM and that Murdock's experience rate is $180 PMPM. Fiesta would correctly calculate that its blended rate PMPM for Murdock should be Fiesta's retention charge plus

• A) $152
• B) $188
• C) $192
• D) $228

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Definitions:

Economic Profits

The surplus achieved when the revenue from business activities exceeds both the explicit and implicit costs, differing from accounting profits by considering opportunity costs.

Accounting Profits

The total revenue of a company minus total explicit costs; the profit figure reported in financial statements.

Marginal Revenue

The additional income received from the sale of one more unit of a product or service.

Competitive Market

A market environment where numerous sellers and buyers exist, ensuring no single entity can dictate the price of a product or service.