Figure 9.6 represents the market for health insurance. Suppose there are two types of consumers, low-cost consumers with $2,000 average medical expenses per year, and high-cost customers with $4,000 average medical expenses per year. The insurance companies estimate that 40% of its customers are high-cost type. If the insurance companies set the price equal to their average cost per customer, what type of customers will dominate the market?

If the Federal Reserve targets the money supply, and the money demand curve shifts to the left, then the Fed

A) can maintain the money supply target, but at a lower interest rate. B) can maintain the money supply target with no change in the interest rate. C) can maintain the money supply target, but at a higher interest rate. D) cannot maintain the money supply target.

In a price-leadership oligopoly, it is much simpler for the price leader to identify its dominant strategy when

a. at least one price follower has a terminal strategy b. it expects competition from the other firms c. it expects other firms to match its prices d. the government actively seeks antitrust penalties e. price equals marginal cost