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

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

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 $400 a day. Suppose Eric is paid $200 if electronics goods profits are $400 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; S50; less; $62.50
O work hard; $100; less; $250

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