3.6 How does the expectation that the government will offer subsidies for future major disasters affect the probability that risk-averse people will buy insurance and the amount they buy? Let the utility function for a risk-averse person be U(W) = 3W0.6 and the probability of a house being completely destroyed be 0.2%. With no subsidy, the loss in wealth is €300,000. Will the person buy insurance if the cost of insurance is €800? If the government provides a subsidy equal to 25% of the cost of rebuilding the house (= 75,000 euros), the loss is reduced to €225,000. Will the person buy insurance if the cost is still €800? If the cost is €400?