Ben just bought a car and signed a car insurance contract. In a year, this contract will expire and Ben will move across the country. Suppose, when he is in the market for a new car insurance contract next year after he moves, the potential insurance companies can all see the number r of car accidents Ben has been involved in this year. This number r depends on Ben's driving skill , Ben's effort e, and the road condition . More specifically, r = - - e. Ben's driving skill is unknown to both Ben and all potential car insurance companies. All believe that Ben's driving skill is 0 (unskilled) with probability 1/2 and 1 (skilled) with probability 1/2 . The road condition is 3 with probability 1/2 and 4 with probability 1/2 . Ben can choose to drive very carefully (e = 2), normally (e = 1) or carelessly (e = 0). But none of the potential car insurance companies observe Ben's effort choice. The potential car insurance companies will offer the car insurance contract that best matches Ben's driving skill. The more likely they think Ben is skilled, the lower the insurance premium they would charge. Ben wants to minimize the insurance premium, but driving carefully is costly. In particular, given the potential insurance companies' belief that Ben is skilled with probability q, Ben's payoff is equal to 8q - c(e), where c(e) = 0 if e = 0, c(e) = 1 if e = 1 and c(e) = 4.5 if e = 2. Use the above information to answer all of the following question.

does Ben have an incentive to drive normally instead of carelessly?

a.No, because by driving normally instead of carelessly, Ben's payoff will go down by 1, given that the expected value of q does not change, while cost of effort goes up by only 1.

b.Yes, because driving normally will reduce Ben's frequency of accidents.

c.No, because driving normally costs more than driving carelessly.

d.Yes, because by driving normally instead of carelessly, Ben's payoff will go up by 2, given that the expected value of q goes up by 3/8 , while cost of effort goes up by only 1.