1. Individual Health Insurance Mandates and Adverse Selection [20 points total] Consider a market for health insurance similar to the one depicted below that we discussed in class. Qtlalllily Suppose individuals have different health levels H, where H is distributed uniformly between 0 and 1. Individuals are risk averse, there is a single insurance plan available for purchase [as in the Akerlof model, NOT the RS model). The marginal cost of medical care depends on an individual's health H, and is characterized by the function MC=20001000*H (notice that a higher value of H corresponds to a healthier person, with lower marginal costs, so the left edge of the graph corresponds to the sickest person with H=0, and the right edge of the graph corresponds to the healthiest person with H=1}. Individuals have utility functions for this insurance plan that result in a risk premium equal to RP=750 SCIOH. a) [1 point] Write down the equation describing the demand function for this insurance plan. [Hint: the demand function is the sum of the marginal cost and risk premium and should express willingness to pay for insurance as a function of H]. b} [2 points] Write down the equation describing the average cost function of the insurer. (Hint: since the MC function is linear. the AC function is also linear. If you nd any two points along the line you can gure out the equation for the line.)