Every member of the population has utility function U(M) = ln(M+1). There are three groups of...

Every member of the population has utility function U(M) = ln(M+1). There are three groups of people of equal size in the population. Each group has a unique probability of getting sick, initial wealth level, and cost of treatment if sick, reported in the table below. Health insurance will cover the entire cost of health care if the individual falls sick.

	Probability of Illness	Initial Wealth	Cost of Health Care if Sick
Health Nuts	0.001	$900	$50
Average Joe’s	0.01	$750	$75
Lethargic Larry’s	0.1	$400	$100

What is the maximum that an individual in each group is willing to pay for health insurance?

Expert Solution

ekkarill92 answered 1 year ago

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