Question
Below is a market for health insurance, with 5 people.Their expected costs, risk premiums, and willingness to pay for insurance are given. The average expected
Below is a market for health insurance, with 5 people.Their expected costs, risk premiums, and willingness to pay for insurance are given. The average expected costs are 92.
Suppose an insurance company offers a premium equal to 92. Determine who will buy and won't buy at that premium (top chart to fill in).
Find the insurer's revenue, expenses and profit at that premium (bottom chart to fill in).
Then repeat for the higher premiums in periods 2 and 3.
| Expected Costs | Risk Premium | Willingness to Pay | Period 1 Premium=$92 | Period 2 Premium=$130 | Period 3 Premium=$180 | ||
| Person 1 | 20 | 2 | 22 | ||||
| Person 2 | 40 | 5 | 45 | ||||
| Person 3 | 80 | 15 | 95 | ||||
| Person 4 | 120 | 30 | 150 | ||||
| Person 5 | 200 | 60 | 260 | ||||
| Total | 460 | ||||||
| Mean | 92 | ||||||
| Insurer Revenue | |||||||
| Insurer Expenses | |||||||
| Profit |
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Climate Policy And Nonrenewable Resources The Green Paradox And Beyond
Authors: Karen Vollebergh, Rick Van Der Ploeg
1st Edition
0262319845, 9780262319843
