Using Figure 11.1, illustrate the probability that someone will obtain insurance for treatment for

(a) A hangnail.

(b) A broken arm.

(c) A “bad hair” day.

(d) Viral meningitis.

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A. Expected Total Utility Utility under certainty E A Expected utility under risk Utility B G F 0 $10,000 B. Marginal Gains and Marginal Costs Consumer's expected marginal gain (willingness to pay), insurer's marginal cost (both in $) Wealth (in $), W $20,000 0 B' Consumer's expected marginal gain for heart attack insurance Insurer's marginal cost Consumer's expected marginal gain for hangnail insurance C' D' A' $20,000 $10,000 Sara will always file a claim Sara will never file a claim Wealth (in $), W Figure 11.1 Impacts of Loading Costs on Availability of Insurance