Same premium based in the average risk

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Reference no: EM138934

Q1. If the inverse demand function toaster is P=60-Q, what is the consumer surplus if price is 30?

Q2. Statistically, teenage drivers are more likely to have an automobile accident than adult drivers. As a result, insurance companies charge higher insurance premiums for teenage drivers. Suppose one insurance company decided to charge teenagers and adults the same premium based in the average risk of an accident among both groups. Using your knowledge of the problem associated with asymmetric information; explain whether you think this insurance company will be profitable.

Reference no: EM138934

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