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

Multiple Choice

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 type of customers will dominate the market?

A) low-cost customers
B) high-cost customers
C) both types equally split the market
D) There is not sufficient information.