1. Assume that you face two medical outcomes in the coming year: Outcome Stay healthy Get sick Probability 0.90 0.10 Cost $0 $20,000 a. What is your expected healthcare cost? b. Assume that an insurance company is willing to sell you a healthcare policy that covers all of your healthcare costs for the coming year for $2,200, would you purchase the policy? Please explain why or why not. c. Now assume that given your lifestyle choices, your probability of getting sick is 50%, what is your expected healthcare cost? d. See parte above. Should the insurance company (see part b) sell you a healthcare policy that covers all of your healthcare cost for the coming year for $2,2007 Please explain. 2. What is the difference between free-for-service reimbursement and capitation? 3. Compare and contrast the concepts of adverse selection and moral hazard and how they impact the cost of healthcare and the cost of health insurance