Principles of Economics, 7th Edition

Published by South-Western College
ISBN 10: 128516587X
ISBN 13: 978-1-28516-587-5

Chapter 22 - Part VII - Frontiers of Microeconomics - Problems and Applications - Page 479: 2

Answer

The economic problem that might arise is that of signaling.

Work Step by Step

The pool of consumers would be less healthy on average, and those consumers would signal that they would use enough insurance to get their premiums' worth of insurance. The company's profits would likely decrease instead of increase.
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