health economics

Question 1: Information Economics (40 points) (atniaq 001) moxa isnia Suppose that there are two types of people, sick and healthy. Sick types have 90% chance of incurring a $1,000 hospital bill. Healthy types have a 20% chance of incurring a $1,000 hospital bill. a) Suppose that the health insurance industry is a perfectly competitive industry, there are no administrative costs, and people's health type is public information. How much will an insurance company charge both types of people to cover this potential hospital bill in an ideal insurance contract? muon RebewellA emiT mumixsM ned rosa ,notes furthw :noblesup loss to1 nevin ous elston Jhin enoilsoup leadmanA Adplew Isupe eovisoar been vov il agoliangfaxe vignet abivong lon off iniog art of idpistle ons octoroo ed noqeq off to loud and no effw ,soage Isnodibbs alood 10 eaton on lud , 10/Blubiso offilneve s eau yam boy Jay is a sick type with an endowment of $10,000. Assume his utility over money is defined as U(M) = M2/3, where M denotes money. This is an example of a concave function. b) What is Jay's utility from his expected income? What about his utilities in the two states