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Now suppose the monopolist decides to give individuals a discount on their health insurance for those who walk five miles. Suppose the different types of
Now suppose the monopolist decides to give individuals a discount on their health insurance for those who walk five miles. Suppose the different types of individuals incur different "costs" associated with walking five miles. The monopolist knows that the cost associated with walking five miles is $200 for Type 1 (very healthy) individuals, $500 for Type 2 (moderately healthy) individuals and $7,000 for Type 3 (unhealthy) individuals. If this is the case, what price should the monopolist charge for health insurance if an individual does not walk the five miles (pnw ) and what price should the monopolist charge for health insurance if an individual does walk the five miles (pw )? What are the monopolist's profits from using this screening type of price discrimination? Show all calculations and explain
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