Unlike perfectly competitive markets, health insurance and health care markets are characterized by asymmetric information in many forms. To see the consequences, consider the following scenario:The population is evenly divided between 2 types of people: healthy people and unhealthy people. Healthy people have expected health care costs of $1000 per year. Unhealthy people have expected health care costs of $5000 per year. Unhealthy people can become healthy by working out, eating healthier, and taking preventive care. Assume that the cost of becoming healthy in terms of time and effort is $2000 per year. These people live in a city with one employer who will hire anyone who is willing to work. This employer provides complete health care to all its employees; all health care costs are covered by the insurance.Do the unhealthy employees have an incentive to become healthy?-No-There is not enough information to tell.-YesWhat is the expected cost of insurance for all the workers?Expected cost: $Suppose a new employer that pays $1500 more in wages per worker but does not offer any insurance (and there is no market for health insurance) enters the market. Which people will go and work for the new employer?-Both groups-None-The healthy-The unhealthyWhat would the new expected cost of insurance be at the original firm?New expected cost: $

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