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Question 3 ' '.-:- Suppose there are two types of people, high risk (H) and low risk (L) with utility function U(c) = (20-5. Each

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Question 3 ' '.-:- Suppose there are two types of people, high risk (H) and low risk (L) with utility function U(c) = (20-5. Each has income (=consumption) of $100. The high risk people are 10% of the population and have a 75% chance of getting cancer in which case their income would be zero. The low risk people are the remainder of the population and have a 25% chance of getting cancer and hence zero income. The private insurance industry is perfectly competitive. (f) Compute expected utility for the each risk type. Is this greater or less than the utility level for each group in the separating equilibrium above? Explain why for each group

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