f. In order for this to be an equilibrium, it must be the case that it is

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f. In order for this to be an equilibrium, it must be the case that it is not possible for an insurance company to offer a “pooling price” that makes at least zero profit while attracting both type 1 and type 2 consumers. (Such a policy has a single price p* that lies between MC1 and MC2

.)

Note that the demand curves graphed thus far were for only one individual of each type. What additional information would you have to know in order to know whether the zero-profit price p* would attract both types?

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