Q1. Why does the assumption of independence of risks matter in the examples of insurance? Illustrate what would happen to premiums if the probabilities of house burning were positively correlated? Can you think of a situation where they might be negatively correlated?

Q2. ) If the price of baseball tickets is $12 every also hockey tickets are $20 every, draw the budget constraint for the consumer. Be sure to specifically label every intercept. Elucidate why (10, 6) is on this budget constraint but you cannot tell anything about the MRS at this point.