Figure 9.6
-Figure 9.6 represents the market for health insurance. Suppose there are two types of consumers, low-cost consumers with $2,000 average medical expenses per year, and high-cost customers with $4,000 average medical expenses per year. The insurance companies estimate that 40% of its customers are high-cost type. If the insurance companies set the price equal to their average cost per customer, what is the insurance companies' average cost per customer ($Y)?

Question

Quizplus · Accepted Answer

The average cost per customer is calculated by taking a weighted average of the costs for low-cost and high-cost consumers: (0.6 * $2,000) + (0.4 * $4,000) = $2,800.

Figure 9.6 -Figure 9.6 Represents the Market for Health Insurance. Suppose There