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Suppose an insurance company has two types of customers: low-cost customers with an average cost of ...

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Suppose an insurance company has two types of customers: low-cost customers with an average cost of ...

Suppose an insurance company has two types of customers: low-cost customers with an average cost of $3,750 and high-cost customers with an average cost of $9,000. If the insurance company expects to have a 50-50 mix of customers, what is their expected average cost per customer? When the insurance company charges a premium equal to their expected average cost, however, they find that only 30 percent of their customers are low-cost customers. What is the actual average cost per customer?
Please round your final answer to two decimal places.

▸ $6,375.00, $5,325.00

▸ $12,750.00, $5,325.00

▸ $12,750.00, $7,425.00

▸ $6,375.00, $7,425.00

Textbook

Macroeconomics

Edition: 3^rd

Authors: Acemoglu, Laibson, List

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