Imagine two scenarios. In scenario 1, you have a $1 million health insurance policy. In scenario 2 you do not have health insurance. You earn an income of $40,000 and have $60,000 in savings. In both scenarios, you fall ill with exactly the same serious illness. In scenario 1, you undergo treatment that costs $850,000. In scenario 2, you undergo treatment that costs $50,000. Can you identify the moral hazard costs of health insurance in this case? If so, what are they? If not, why not? Explain your answer