Question: 10. Suppose all insurance buyers have the same utility function U(W)-InW. and the same initial wealth of S10,001. Assume there are 2 types of potential

10. Suppose all insurance buyers have the same utility function U(W)-InW. and the same initial wealth of S10,001. Assume there are 2 types of potential insurance buyers (same proportion). High Risk (50%) Probability Loss 10% $10,000 90% 0 Low Risk (50%) Probability Loss 2% $10,000 98% 0 An insurance company cannot differentiate high-risk and low-risk buyers, and decides to offer full coverage insurance at a price of $1000. Will the company be able to make a profit? Explain using your calculations

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