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Moral hazard and Insurance Moral Hasard and Insurance (10 points) The utility is U = W2 3005' + 9081/2; where W is wealth and S

Moral hazard and Insurance

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Moral Hasard and Insurance (10 points) The utility is U = W\"2 3005' + 9081/2; where W is wealth and S is care taken to avoid accidents. Probability of accident is 0.70 31/2 Wealth is $700,000 without accident and $250,000 with accident. a. Calculate S, EU and CE without insurance (5 points). b. Calculate S and EU with full insurance (5 points)

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