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Done added everthing pls help TUU, UUU Total Cost to Insurer: 780,000 If the market for this type of insurance is perfectly competitive and all

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Done added everthing pls help

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TUU, UUU Total Cost to Insurer: 780,000 If the market for this type of insurance is perfectly competitive and all 200 salespeople are forced to purchase insurance that guarantees A-Ra status, the premium will be $3,900 > per salesperson (rounded to the nearest whole number). In reality, not all salespeople will be equally willing to purchase A-Salesperson insurance. Assume that salespeople know which rank they will e the absence of insurance) and that each is willing to pay $4,000 to guarantee a 1-Rank promotion and an additional $800 for each promotion that (for example, a D-Salesperson would pay $5,600 to gain three ranks and become an A-Salesperson). Under these circumstances, if the in charges the same premium you found above, the salespeople who know they will earn B-, C-; and D-Rank will choose to buy insuran insurer will, therefore, collect a total of $780,000 . in premiums and will have to pay the owner of the company a total of $14,400 promote all those salespeople. In order to break even when not all salespeople buy insurance, the insurer will have to raise the premium to per salesperson (roun the nearest whole number). At this new premium, only the salespeople will be willing to purchase insurance; therefor insurer will collect a total of in premiums and will have to pay the owner a total of The insurer will have to raise the premium again to per salesperson (rounded up to the nearest whole number) to pay for all these salespeople's promotions. At this new premium, only the salespeople will be willing to purchase insurance; therefore th insurer will collect a total of in premiums and will have to pay the owner a total of . Given the total amount the will collect and the amount he will expect to pay out, the insurer will offer policies' at this price. The above example illustrates the problem of adverse selection

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