PRINC OF ECONOMICS PKG >CUSTOM<
7th Edition
ISBN: 9781305018549
Author: Mankiw
Publisher: CENGAGE C
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Chapter 22, Problem 2PA
To determine
The problem ofadverse selection.
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Suppose that the Long-Life Health Insurance Firm charges $5,000 annually for a family insurance policy. An advisor suggests that the company raise the annual price to $6,000 to increase its profits. If the firm followed this suggestion, what economic problem might arise? Would the firm’s pool of customers tend to become more or less healthy on average? Would the company’s profit necessarily increase?
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Chapter 22 Solutions
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