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Hello I need help answering this question set Question 1 Consider the Rothschild -Stiglitz Model. in this example. we will examine the case of asymmetric

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Question 1 Consider the Rothschild -Stiglitz Model. in this example. we will examine the case of asymmetric insurance and heterogenous risk types. The utility function (for each consumer] has the following form' U (I) = I\" The trail types have a probability bf becoming sick' pm\" = 0.25 , and the robust types have a probability of becoming sick: M\" = 0.05 All individuals start with income of 51000. if an individual becomes sick. they lose $200 The insurance company decides tb brier 2 embeds- No Coverage Total Coverage M rnai Coverage Payout if sick (q) 0 $200 $23 premium {r} 0 $33 $1 So, the individuals ml'l decided to stay at their endowment or purchase an insurance contract Calculate your expected utility values to at least 3 decimal spots, a. [8 points] What would the trail individuals do? {Calculate the expected utility from each option: choose the one with highest expected utility.] l1 [8 points] What would the robust individuals do\" [Calculate the expected utility from each option: choose the one with highest expected utility} c. [5 points] It the market has 100 potential customers. of whom 75 are frail and 25 are robust.what is the insurance company's expected prot (assume the company is risk neutral}

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