Problem 1: Adverse Selection, continued. Every person has $1,0[HJ to spend. There are two groups of people, 100 sick people and 3GB healthy people. A sick person visits the hospital with probability p = 0.25. A healthy person visits the hospital with probability p = {1.05. Any hospital visit costs $400. All individuals have the following expected utility hmction: E0 = u swoon a) If the insurance company charges the price a: = 40 to everyone for full insurance, who will buy insurance? Who will not buy insurance? 1)) Consider the insurance company oEers full insurance at a high price of $100 and partial insurance {only covers $20 in case of hospital visit) at a low price of $1. Will a sick person buy full, partial, or no insurance? Will a healthy person buy full, partial, or no insurance? c) 'Wllich outcome is more efcient, at) or b)? d) Describe why health insurance providers typically offer \"high deductible, low premium\" and \"low deductible, high premium\" insurance packages. Consider the results from this