6. Insurance. Suppose an individual has initial wealth w. With prob. p an accident occurs such that she will lose an amount of money L. The individual can buy insurance which pays her q dollars in case the accident happens. The price for insurance is q where is the premium per dollar of coverage. The expected profit of the insurance is given by pq which we assume to be zero due to competition; thus = p. The individual is a risk averse expected utility maximizer with vNM utility v(x) = x5 where x is her final wealth level. How much coverage q does the individual choose to buy? Depict the individual's situation in a 2-states-of-the-world diagram. -