Eric has a job at an electronics store in a mall. Eric doesn't like to work hard, and it costs him $100 to do so. Eric's employer cannot observe whether Eric works hard or not. If Eric works hard, there is a 75% probability that electronics goods profits will equal $400 a day and a 25% probability that electronics goods profits will equal $100 a day. If Eric shirks, there is a 75% probability that electronics goods profits will equal S100 a day and a 25% probability that electronics goods profits will equal S400 a day. Suppose Eric is paid $200 if electronics goods profits are S400 a day and $50 if electronics goods profits are S100 a day. Eric will because the net gain of from shirking is than the net gain of. from working hard. O shirk; $87.50; more; $62.50 O shirk; $125; more; $118 O work hard; $50; less; $62.50 O work hard; $100; less; $250

Eric has a job at an electronics store in a mall. Eric doesn't like to work hard, and it costs him $100 to do so. Eric's employer cannot observe whether Eric works hard or not. If Eric works hard, there is a 75% probability that electronics goods profits will equal $400 a day and a 25% probability that electronics goods profits will equal $100 a day. If Eric shirks, there is a 75% probability that electronics goods profits will equal S100 a day and a 25% probability that electronics goods profits will equal S400 a day. Suppose Eric is paid $200 if electronics goods profits are S400 a day and $50 if electronics goods profits are S100 a day. Eric will because the net gain of from shirking is than the net gain of. from working hard. O shirk; $87.50; more; $62.50 O shirk; $125; more; $118 O work hard; $50; less; $62.50 O work hard; $100; less; $250

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter7: Uncertainty

Section: Chapter Questions

Problem 7.3P

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