7 Consider an HIV patient who recently started HAART therapy and whose health is improving rapidly as a result. Viatical settlement firms will offer him more money for his life insurance policy than they would have before he started HAART because his health outlook is much better. The fact that high-risk customers are usually less risk-averse than low-risk customers helps counteract adverse selection. Analytical problems Consider Table 10.1, which has data on insurance status and medical expenditures for different types of professors at Adverse Selection University (ASU). In 2014, every employee of ASU was offered a full insurance contract at no premium. In 2015, ASU charged any employee who wanted to keep health insurance a $4,000 premium. As a result, all history professors dropped their coverage in 2015. Assume that the underlying health of ASU professors did not change much from year to year. a Is there evidence of moral hazard in this market? How do you know? b Is there evidence of adverse selection in t