Suppose that everyone has the same utility function and an annual income of $50000 but people face different risks to health. Person A has a 0.20 chance of experiencing a health shock that requires $400 in expenses while Person B has a 0.002 percent chance of experiencing a health shock that requires $40,000. Graphically illustrate that Person B would be willing to pay a greater risk premium for insurance that Person A although the expected loss is the same for both types of people. Explain your answer.

What is the relationship between marginal external cost, marginal social cost, and marginal private cost? a. marginal social cost equals marginal private cost plus marginal external cost. b. marginal private cost plus marginal social cost equals marginal external cost. c. marginal social cost plus marginal external cost equals marginal private cost. d. marginal external cost equals marginal private cost minus marginal social cost. marginal external cost a. is expressed in dollars, so it is not an opportunity cost b. is an opportunity cost borne by someone other than the producer c. is equal to two times the marginal private cost d. is a convenient economics concept that is not real