What is the? break-even price for the insurance? company

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Reference no: EM131925800

Crop Insurance. Consider a state in which farmers are divided equally into two? types: high risk and low risk. The average annual crop loss? (and possible insurance? claim) is ?$300 for a? low-risk farmer and ?$1 comma 1,400 for a? high-risk farmer.

a. If all farmers were to buy? insurance, what is the? break-even price for the insurance? company? ?$ nothing

?(Enter your response rounded to the nearest whole? number.)

b. Suppose a farmer will purchase insurance only if the price? (the annual? premium) is no more than ?50% higher than his or her average crop loss. What is the equilibrium? price? ?$ nothing

?(Enter your response rounded to the nearest whole? number.)

Reference no: EM131925800

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