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Managerial Economics · End Term · 10 May 2026 · January 2026 term · Set 1

Question 31: If the insurance provider offered medical insurance at a…

Question 31

+1 markOne correct option

There are 40 low-risk people and 60 high-risk people. A low-risk person has an average of $1500 in medical expenses each year and is willing to pay $1800 for medical insurance (this person is risk-averse). A high-risk person has an average of $2200 in medical expenses each year and is willing to pay $2600 for medical insurance. Insurance companies are unable to differentiate who is high-risk and who is low-risk.
Based on the above data, answer the given subquestions.

If the insurance provider offered medical insurance at a price of $2000

  1. A

    Everyone will enroll for the insurance, irrespective of the type

  2. B

    The provider will lose money

  3. C

    Both Everyone will enroll for the insurance, irrespective of the type and The provider will lose money

  4. D

    None of these

Show answer

Correct answer

  • B

    The provider will lose money

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Question 31 of 37 in the IIT Madras BS Managerial Economics (Managerial Economics) End Term paper sat on 10 May 2026, in the January 2026 term (Managerial Economics 06 May 26). It carries 1 mark.

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