Suppose that the Live-Long-and-Prosper Health Insurance Company charges $5,000 annually for a family insurance policy. The company's

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Suppose that the Live-Long-and-Prosper Health Insurance Company charges $5,000 annually for a family insurance policy. The company's president suggests that the company raise the annual price to $6,000 to increase its profits. If the firm followed this suggestion, what economic problem might arise? Would the firm's pool of customers tend to become more or less healthy on average? Would the company's profits necessarily increase?

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Principles of Economics

ISBN: 978-1305585126

8th edition

Authors: N. Gregory Mankiw

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