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1. Tom is currently without health insurance coverage. He derives utility (U) from his income (n) according to the following function: U = VY 2 Tom's income is $85,000 per year. He realizes that there is about a 10 percent probability that he may suffer a heart attack. The cost of treatment will be about $40,000 if a heart attack occurs. Suppose Tom must pay a premium of $3,500 per year for health insurance coverage. Would he buy the health insurance? Why or why not? [4 points] 2. With suitable and well-labeled graphs, explain the differences in the conventional view of moral hazard and Nyman's view of moral hazard associated with health insurance coverage. [4 points] 3. What is adverse selection? Clearly explain the impact of adverse selection on risk pooling using a suitable graph. [3 points] 4.Consider the dominant insurer-pricing model in the private health insurance industry. Draw a suitable graph and label the equilibrium price. [4 points]