Suppose there are two types of people in an insurance market: high and low risks.The high-risk person is sick 10% of the time and the low-risk person is sick 5% of the time.The probability of any individual being high risk is 40%.Upon getting sick,an individual loses $10,000 in medical expenses.What if the individuals do not know their type?

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The Answer of Suppose there are two types of people in an insurance market: high and low risks.The high-risk person is sick 10% of the time and the low-risk person is sick 5% of the time.The probability of any individual being high risk is 40%.Upon getting sick,an individual loses $10,000 in medical expenses.What if the individuals do not know their type?

Suppose There Are Two Types of People in an Insurance