Assume there are 1,000,000 individuals; 1% of the individuals have a 30% chance of getting into an accident and 99% of them have a 2% chance of getting into an accident. In either case, the accident costs $50,000. Imagine that an insurance company is considering entering this market. Although individuals know their risk type, the insurance company does not. a. Explain what is meant by the adverse selection problem in this specific context. b. If the insurance company were to offer community rated insurance, what premium would it charge and would that offering be sustainable? Explain. c. Would an individual mandate change your analysis in part (b)? Explain. d. If, instead of an individual mandate, a penalty was put in place if an individual did not buy community-rated insurance. What is the smallest penalty that would guarantee all individuals participate (assuming they are all risk averse)