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2. Refer to the textbook problem that we solved in class on expected utility model of insurance. We saw that Joe doesn't buy health insurance

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2. Refer to the textbook problem that we solved in class on expected utility model of insurance. We saw that Joe doesn't buy health insurance if the premium is $1500. Now suppose that the government passes a law that allows all people to have their entire insurance premium exempted from taxes. Say Joe is in the 33% tax bracket. Would he buy health insurance in that case if the premium is still $1500 but exempted from taxes? Show your calculations and explain carefully. (10 points) (Hint: You can calculate the effective premium in this case that Joe has to pay given the tax exemption like we did in class. And following that, you can do the utility comparison to gure out whether he will buy insurance or not based on that effective premium.)

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