QUESTION 6 In this question, you need to compute the consumer's expected utility under different situations. You will need to approximate some of your answers. Suppose a consumer has income |=$100. If the consumer gets sick, he must go to the doctor. The cost of a visit to the doctor is $75. The consumer's utility from income is u(l) = J7 The probability of getting sick depends on whether the consumer goes to the gym. If the consumer goes to the gym, then he gets sick with probability 10%. If the consumer does not go to the gym, then he gets sick with probability 90%. The cost of going to the gym is $10. Compute the consumer's expected utility if he goes to go to the gym: E(u)= v ' . 1} Compute the consumer's expected utility if he chooses not to go to the gym: E(u)= Now suppose that an insurance company offers to fully insure this consumer. The consumer pays a premium p=7.5 upfront. If the consumer gets sick, then the insurance company fully pays for the doctor. Compute the consumer's expected utility if he purchases the insurance AND goes to the gym: E(u)= v . Finally, compute the consumer's expected utility if he purchases the insurance AND does NOT go to the gym: E(u J *Select Answer" moral hazard This question describes an example of 6 i (select adverse selection or moral hazard). adverse selection 5.5 8.9 9.1 9.6