Assume that an insurance company sets a single price for insurance equal to the total medical bills paid by the insurance company divided by the number of its customers. If it pays medical bills of $5,000 for half of its customers and $9,000 for the other half of its customers, the price of insurance will be
A) $5,000.
B) $6,000.
C) $7,000.
D) $9,000.

Question

Quizplus · Accepted Answer

The total medical bills paid by the insurance company would be:

($5,000 * 0.5) + ($9,000 * 0.5) = $7,000

The number of its customers is not given in the problem, but it does not matter because the price of insurance is simply the total medical bills paid divided by the number of customers. Therefore, the price of insurance would be:

$7,000 / number of customers

Since we do not have the exact number of customers, we cannot calculate the exact price of insurance, but we know that it would be between $5,000 and $9,000. The closest option is C, $7,000.

Assume That an Insurance Company Sets a Single Price for Insurance