P15) Suppose that the there are two types of people in a population. 25% of the population is generally \"healthy\" and 75% of the population is \"unhealthy\". There is a 10% chance that a person gets sick whether they are \"healthy\" or \"unhealthy\" doesn't affect their chances of getting sick. However, their health status does affect the costs of their illness. The cost associated with an illness for a healthy individual is $100, but for unhealthy individuals it is $200. Each person knows their health status, but insurance companies can n_ot distinguish healthy from unhealthy individuals in advance. Consider the situation in which the insurance company offers actuarially fair insurance that will cover all expenses of an illness (so either $100 or $200). The insurance company makes no expected prots (so in expectation it charges premiums to cover its expected costs). A) If all people in the population buy insurance, what would be the actuarially fair price or premium? B) Assume that healthy people are risk neutral. Would healthy people want this insurance? C) If the insurance company knows that people behave as in part (B), what premium do they charge and who buys the insurance? P16) Suppose that the there are two types of people in a population. 90% of the population is generally \"healthy\" and 10% of the population is \"unhealthy\". There is a 5% chance that a person gets sick whether they are \"healthy\" or \"unhealthy\" doesn't affect their chances of getting sick. However, their health status does affect the costs of their illness. The cost associated with an illness for a healthy individual is $100, but for unhealthy individuals it is $1,000. Each person knows their health status, but insurance companies can not distinguish healthy from unhealthy individuals in advance. Consider the situation in which the insurance company offers actuarially fair insurance that will cover all expenses of an illness (so either $100 or $1,000). The insurance company makes no expected prots (so in expectation it charges premiums to cover its expected costs). A) If all people in the population buy insurance, what would be the actuarially fair price or premium? B) Assume that healthy and unhealthy people are risk neutral. Would healthy people want this insurance at the price you computed in part (A)? C) Using your answers to parts (A) and (B) above, if the insurance company can not determine who is unhealthy or healthy, will they offer the insurance at the premium you computed in part (A)