Predict the new equilibrium

Reference no: EM131134677

Mandatory Insurance. Consider a city with 100 drivers and a perfectly competitive market for automobile
insurance. The demand curve for auto insurance is linear and negatively sloped, with a slope of $10 per customer. At the initial price of $1,500, half the city s drivers (50 drivers) buy insurance. The price is just high enough to cover all the costs of providing insurance, including a 50 percent premium to cover the costs associated with uninsured drivers. Suppose the city makes auto insurance mandatory.
Predict the new equilibrium. (Related to Application 4 on page 631.)

Reference no: EM131134677

Questions Cloud

Describes the purpose of the audit work program : Which of the following BEST describes the purpose of the audit work program?

Briefly describe how a retroelement moves to a new location : In the Meselson and Stahl experiment, E. coli cells were grown in heavy (15N) nitrogen, and then switched to light nitrogen. Briefly describe how a retroelement moves to a new location

The foundation of the audit function : Which of the following BEST describes why risk assessment can be viewed as the foundation of the audit function:

Describe how attendees could interact in this station : Describe the most essential information attendees should know about UDL and how it specifically pertains to the population of Pre-Kindergarten through 12th grade students in the school district or the adult learners at the community center.

Predict the new equilibrium : The price is just high enough to cover all the costs of providing insurance, including a 50 percent premium to cover the costs associated with uninsured drivers. Suppose the city makes auto insurance mandatory.

Establish the barrier to entry within the industry : For start up technology companies it’s important to establish the barrier to entry within the industry which your organization will reside. What is barrier to entry for an organization and is there a tough barrier to entry of the technology that you ..

What blood type can a child born to a mother : What blood type(s) can a child born to a mother with B- blood type and a father with A+ blood type have? Explain your answer fully. Be sure to focus on the concepts of dominant and recessive alleles, multiple alleles, and codominance in your expla..

Studying the shopping habits of its customers : A local department store is studying the shopping habits of its customers. They think that the longer customers spend in the store the more they buy. Their study resulted in the following information regarding the amount of time women and men spen..

Environmental costs for regulated monopoly : Unfortunately, the BPAs dams block the paths of migrating fish, contributing to the decline of several species. Suppose that BPA spends $100 million to make its hydroelectric dams less hazardous for migrating fish. Who will bear the cost of this p..

User Account

All Pages