Healthcare problem

Consider an insurance company. The company assesses the risk level with an index that varies from 1 (low risk) to 10 (high risk) in equal increments (1, 2,..., 10). Each risk class has the same probability 10%. The monetary surplus from purchasing insurance is represented by the number k $2. Sellers of insurance compete away the surplus to insurance buyers.

(a) What is the competitive market price without adverse selection (neither the individ- ual nor the insurance company knows the true value v)?

(b) What is the competitive market price with adverse selection (the individual knows the true value v, the insurance company doesn't)?

(c) Provide a real-world example of an insurance product that fits scenario (a) above. The correct answer may be no insurance product, but you need to explain why.

(d) Provide a real-world example of an insurance product that fits scenario

(b) The correct answer may be no insurance product," but you need to explain why