1. Suppose an insurance pool is composed of 200 people. Members of this group have a 5 in 100 chance per year to have an accident which will cost the insurer $15,000 per accident. What is the minimum amount the insurer would require from each person in order to cover these costs?

2. What effect would an "individual mandate" on health insurance have on the problem of adverse selection? Explain.

3. Most markets involve a direct transaction betweenthe buyer andthe seller, but with health insurance it is a 3^rd party that makes a large part of the payments (the insurer). Becausethe 3rd partypays some of the costs, how might this affect some of the treatment decisions made by patients and doctors?

4. Will sellers of the following types of insurance mainly face specific or systematic risk? Explain your answer for each.

a. Life Insurance

b. Health Insurance

c. Auto Insurance

d. Unemployment Insurance

e. Home Insurance