1ppose that you have a job paying $2500 per month. TWith 10 percent probability, you may get sick and your monthly earl ill be reduced by $900. Assume that you spend all of your income on consumption and you have no savings. Your 11' om consumption is given by MC) = V? and you are interested in maximizing the expected utility. I.) Suppose that you have no access to insurance. What is your expected income next month? What is your exp: consumption? n) What is the maximiun price that you would be willing to pay for the rst dollar of insurance? :) Suppose that you can buy insurance that will cover all of your $900 less. What is the maximum amount that you a be willing to payr for that insurance? i) If you divide the amount obtained in part (c) by the amount of coverage purchased ($900), you should get a. no] that 13 smaller than the price that you'd be willing to pay for the first dollar of coverage but larger than the actual fair price. Explain why. 2} Suppose the dollar of coverage costs q=1f9. How much coverage are you going to buy