(solution) Uninformed Sellers and Knowledgeable Buyers: Insurance Suppose the average annual malpractice…

(solution) Uninformed Sellers and Knowledgeable Buyers: Insurance Suppose the average annual malpractice…

Uninformed Sellers and Knowledgeable Buyers: Insurance Suppose the average annual malpractice cost is $40,000 for reckless doctors and $2,000 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 $ . If careful doctors are not willing to pay any more than $5,000 for insurance, the price required for zero economic profit is $ .