Part 1 A. A private insurance company, \"ProgIn\" now offers an optional new policy to its auto customers: Agree to have your car tted with an electronic Event-Recording Device that records every detail about your driving habits, and qualify for a substantial reduction in your premiums. Explain hovtr this new plan helps to reduce the problems of adverse selection. (2 5%) B. The GREI (Group of Researchers in Economics of Information) of the University of Very Intelligent People (VIP) has decreed that student assignments exceeding the word limit and r' or submitted after the due date will be marked at zero. Using the intuition ofthe Economics of Information discuss the eiciestcy and equity problems addressed by these regulations (25%) Part 2 (50%) Suppose that the costs of going to college are given by 60,000 per year in college for a low- ability person and 30,000 per year for a high-ability person In the economy, there are two types of workers, high-ability and low-ability. Employers cannot distinguish between the types of workers, so they pay each worker 250,000, the average value of output per worker. Employers will pay workers 380,000 if they earn a four-year degree. a. Will high-ability workers choose to get a four-year degree? How about low-ability workers? b. Because of rampant grade ination, the cost of going to college for a low-abilinr person falls to 40,000 per year. Will low-ability workers choose to get a four-year degree? Does going to college serve as an effective signal