2. Consider the Rothschild Stiglitz model of insurance markets. a. Illustrate the equilibrium we would expect in the ins

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2. Consider the Rothschild Stiglitz model of insurancemarkets.
a. Illustrate the equilibrium we would expect in the insurancemarket if there were no information asymmetries. In other words, ifthe insurance company can observe each person’s health status.
b. Now illustrate graphically and describe in words a situationwhere a “Rothschild and Stiglitz” pooling equilibrium fails toexist.
c. Illustrate graphically and describe in words a situationwhere a “Rothschild and Stiglitz” separating equilibriumexists.
d. Now illustrate graphically and describe in words a situationwhere a “Rothschild and Stiglitz” separating equilibrium fails toexist. e. What is the intuition behind the difference between youranswer to part a) and your answer to part c)?