A project manager hires an agent to work on a project and the agent can work hard or not hard. If the agent works hard, the project succeeds with prob. 0.95, whereas if the agent does not work hard, the prob. of success is only 0.75. Assume the agent's cost of working hard is $60 and the cost of not working hard is $10. If the manager pays the agent $W if the project succeeds, what is the minimum W needed to induce the agent to work hard? O $240 O $244 O $250 O $254
A project manager hires an agent to work on a project and the agent can work hard or not hard. If the agent works hard, the project succeeds with prob. 0.95, whereas if the agent does not work hard, the prob. of success is only 0.75. Assume the agent's cost of working hard is $60 and the cost of not working hard is $10. If the manager pays the agent $W if the project succeeds, what is the minimum W needed to induce the agent to work hard? O $240 O $244 O $250 O $254
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:A project manager hires an agent to work on a project and the agent can work hard or not hard. If the agent works hard, the
project succeeds with prob. 0.95, whereas if the agent does not work hard, the prob. of success is only 0.75. Assume the
agent's cost of working hard is $60 and the cost of not working hard is $10. If the manager pays the agent $W if the project
succeeds, what is the minimum W needed to induce the agent to work hard?
O $240
$244
$250
O $254
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