Background for questions 1-4: All houses in the city of Macondo are made of wood. A typical Macondo resident values their house at 50,000. During a severe dry season, it is estimated that there is 20% probability that a house would catch fire. When a house burns down, its value falls to 5,000, since extensive reparations will be needed. Citizens of Macondo, all of which are homeowners, can incur a cost of 5,000 each and paint their houses in fire resistant paint. By doing this, the likelihood of a house burning down falls to 10%. Assume that citizens of Macondo do not have another source of wealth; and their utility is given by u(w) = w. 4. The insurance company is thinking about changing the premium to avoid the moral hazard problem. Is there a value of the premium they could charge that would induce homeowners to simultaneously purchase insurance and paint their house to protect themselves from fire? !Use the link provided in the class' BruinLearn site to submit this problem set. ECON 101 Winter 2023 - UCLA (a) P = 100 (b) P = 3,500 (c) P = 5,000 (d) P = 7,800 (e) There is no positive value of the premium that enables this