An enterprising student Oliver decides he can make money by selling grade insurance to his...
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Accounting
An enterprising student Oliver decides he can make money by selling grade insurance to his fellow students. Oliver's class has 100 students. He will pay $500 to any student policyholder who gets an F. Because only 2% of all grades are Fs, Oliver computes that he can break even if he charges students a $10 premium. To make a profit, he decides to charge a $15 premium. a) What asymmetric information problem is his business likely to encounter? Explain. b) Would it be helpful to his business if insurance was compulsory for everyone? Explain. c) Would compulsory insurance necessarily make his business profitable? Explain
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