Exercise 3 Consider a market of risk-averse decision makers, each with a utility function if = . Each decision maker has an income of 90,000, but faces the possibility of a catastrophic loss of 50,000 in income. Each decision maker can purchase an insurance policy that fully compensates her for her loss. This insurance policy has a cost of 5,900. Suppose each decision maker potentially has a diEerent probability (1 of experiencing the loss. 1. What is the smallest value of q so that a decision maker purchases insurance? 2. What would happen to this smallest 1value of q if the insurance company were to raise the insurance premium from 5,900 to 27,500