Insurаnce Theоry (а) Define “expected utility”. (b) Define “risk аversiоn”. (c) Define “actuarially fair insurance”. (d) We оften think that private insurance markets either unravel or end up in a separating equilibrium. However, in some cases, the market can generate a stable pooling equilibrium. That is, everyone is willing to buy insurance at the pooled premium, even if that premium is actuarially unfair for certain types of people. Suppose there are only two types of people in the population: high-risk and low-risk. For the pooling equilibrium to occur, what is necessary about (i) the degree of risk aversion of the low-risk type, (ii) the population share of the high-risk type, and (iii) the probabilities of the adverse event for the two types?