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An insurance company looks at the records for millions of homeowners and sees that the mean loss from ?re in a year is μ = $300 per person. (Most of us have no loss, but a few lose their homes. The $300 is the average loss.) The company plans to sell ?re insurance for $300 plus enough to cover its costs and pro?t. Explain clearly why it would be stupid to sell only 10 policies. Then explain why selling thousands of such policies is a safe business.

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Statistics and Probability, Statistics

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