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2] [30%] There are two types of coffee shop owners: observant and negligent [owners can't choose whether they're observant or negligentthey're just born one way or the other]. The observant types take extra precautions to make sure that the electrical appliances and wiring are up to code. The negligent types worry less about details likeI fraying electrical cords. There is a risk of re equal to .2 in the shops of observant owners and equal to .6 in the shops of negligent owners. While the owners know the risk of re in their own coffee shops, the insurance companies [it'll]? know the overall distribution of re risk across shops: 30% of the owners are obs ervanLAll coffee shop owners receive an income of 100 from the business if there is no re, and have no income [a nancial loss of 100] in the event of a re. Bwners have utility over income [1'] in either state given by \"(1') = J; Note: If you get stuck in your analytical results, draw the appropriate graphs in the state-contingent space to receive parlial credit. a] Show that the pair of secondvbest separating contracts results in coverage of the low-risk type [after rounding] of $20.09 and coverage of $100 for the high risk type. b] Dues a stable competitive market equilibrium exist under the Rothschild- Stiglltz concept of market equilibrium? Support your answer with calculations