Figure 14.6 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. If the insurance companies are pessimistic and set their price according to their pessimistic expectations:
A. the companies' pessimism is not justified.
B. the market will include some low-cost and some high-cost customers.
C. the market will include only low-cost customers.
D. the market will include only high-cost customers.
Answer: D
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