1. Mrs. Smith's utility function is the same as that shown in Table 10-1. Her initial level of wealth is $10,000. Her annual medical expenses if she becomes ill would be $1200. Her probability of becoming ill (and thus incurring the $1200 medical expenses) is 20% or 0.2. The price of an insurance policy is $300. If Mrs. Smith were a utility maximizer, should she purchase insurance? b. Should she purchase insurance if the price were $600? Would Mrs. Smith purchase insurance at $600 if her medical expenses, in case she became ill, were $2000? d. Is Mrs. Smith risk-averse, risk-neutral, or a risk-taker? a. C. 1. Mrs. Smith's utility function is the same as that shown in Table 10-1. Her initial level of wealth is $10,000. Her annual medical expenses if she becomes ill would be $1200. Her probability of becoming ill (and thus incurring the $1200 medical expenses) is 20% or 0.2. The price of an insurance policy is $300. If Mrs. Smith were a utility maximizer, should she purchase insurance? b. Should she purchase insurance if the price were $600? Would Mrs. Smith purchase insurance at $600 if her medical expenses, in case she became ill, were $2000? d. Is Mrs. Smith risk-averse, risk-neutral, or a risk-taker? a. C