Question

Suppose that the average annual malpractice cost is $50,000 for reckless doctors and $4,000 for careful doctors. If half of an insurance company's insured doctors are reckless, the company will earn zero economic profit if the price of insurance is $. (Enter your response as an integer.)

Name: suppose that the average annual malpractice cost is 50000 for reckless doctors and 4000 for careful doctors if half of an insurance companys insured doctors are reckless the company will ear 12648
Uploaded: 2023-09-26T01:23:22-08:00
Duration: 2 min 23 s
Channel: Akash M
Description: suppose that the average annual malpractice cost is 50000 for reckless doctors and 4000 for careful doctors if half of an insurance companys insured doctors are reckless the company will ear 12648

          Suppose that the average annual malpractice cost is $50,000 for reckless doctors and $4,000 for careful doctors. If half of an insurance company's insured doctors are reckless, the company will
earn zero economic profit if the price of insurance is $. (Enter your response as an integer.)

suppose that the average annual malpractice cost is 50000 for reckless doctors and 4000 for careful doctors if half of an insurance companys insured doctors are reckless the company will ear 12648

Added by Heidi A.

Principles of Economics

Gregory Mankiw 8th Edition

Instant Answer

Solved by Expert Akash M

09/26/2023

Step 1

We are given that $C_r = \$50,000$ and $C_c = \$4,000$. Let $p$ be the proportion of reckless doctors, which is given as $p = 0.5$. Then the proportion of careful doctors is $1-p = 1-0.5 = 0.5$. The average cost is the weighted average of the costs for reckless Show more…

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Suppose that the average annual malpractice cost is $50,000 for reckless doctors and $4,000 for careful doctors. If half of an insurance company's insured doctors are reckless, the company will earn zero economic profit if the price of insurance is $. (Enter your response as an integer.)