Suppose that the Live-Long-and-Prosper Health Insurance Company charges $5,000 annually

Chapter 22, Problem Problems and Applications 22.2

(choose chapter or problem)

Suppose that the Live-Long-and-Prosper Health Insurance Company charges $5,000 annually for a family insurance policy. The companys president 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 firms pool of customers tend to become more or less healthy on average? Would the companys profits necessarily increase?

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