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Suppose that male drivers are less likely to have an automobile accident than female drivers. As a result, insurance companies charge lower insurance premiums for
Suppose that male drivers are less likely to have an automobile accident than female drivers. As a result, insurance companies charge lower insurance premiums for male drivers. Suppose one insurance company decided to charge male drivers and female drivers the same premium based on the average risk of an accident among both groups. Using your knowledge of the problems associated with asymmetric information, explain whether you think this insurance company will be profitable.
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