1. Suppose an individual has two states of health: Healthy and unhealthy. When they are healthy, they earn $10,000. When they are unhealthy, they must take time off from work and now earn $2,000. Suppose the probability of the in- dividual being healthy is .90 and the probability of being unhealthy is .10. Let's say the individual is offered to purchase an insurance contract for $800 that pays the individual $8,000 if they are sick. How much will this individ- ual earn when they are sick if they purchase insurance? How much will this individual earn when they are healthy if they purchase insurance?

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1 suppose an individual has two states of health healthy and unhealthy

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1. Suppose an individual has two states of health: Healthy and unhealthy. When they are healthy, they earn $10,000. When they are unhealthy, they must take time off from work and now earn $2,000. Suppose the probability of the in- dividual being healthy is .90 and the probability of being unhealthy is .10. Let's say th