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An insurance company offers doctors malpractice insurance.
assume that malpractice claims against careful doctors cost $5,000 on average over the term of the policy and settling malpractice claims against reckless doctors costs $30,000.
doctors are risk-neutral and know whether they are reckless or careful, but the insurance company only knows that 10% of doctors are reckless.
how much do insurance companies have to charge for malpractice insurance to break even?
a. $5,000
b. $7,500
c. $27,000
d. $30,000
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An insurance company offers doctors malpractice insurance.
assume that malpractice claims aga...
assume that malpractice claims aga...
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