Susan is a self-employed consultant, earning $85,000 annually. She does not have health insurance but knows that, in a given year, there is a 5 percent probability (i.e. 0.05) she will develop a serious illness. If so, she could expect medical bills to be as high as $30,000. Susan derives utility from her income according to the following formula:

U = Y(0.4), (i.e. Y raised to the 0.4 power), where Y is annual income.

Use this information to answer the questions below

A.What is Susan's expected utility?(round to two decimal places)

B. What is Susan's maximum willingness to pay for health insurance? (round to nearest whole number)

C. What is Susan's risk premium? (round to nearest whole number)

D. Susan is offered an individual, full-coverage health insurance policy for which she would have to pay a $2,000 annual premium. She is in the 22 percent tax bracket and could deduct the insurance premium from her taxable income. Would she buy the policy, and would the tax deduction affect (or change) her decision? Briefly explain.