ECO200Y5 Study Guide - Final Guide: Competitive Equilibrium, Marginal Cost, Nationalization

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Tutorial 16 - monday august 11, 2014 - 4pm - 5pm. Question 15. 2 p. 563 where w is the total of all monetary to her and 100 represents the cost to her of the effort of running the store. Clare"s next best alternative to managing the store provides her with zero utility. The store"s gross profit depends on random factors. There is a 50% chance it earns ,000 (where by earnings we mean gross profits, not including payments to the manager) and a 50% chance it earns only . Suppose that clare can still choose to exert. Question 15. 3 p. 563 effort, as in question 15. 2, but that she can also choose not to exert effort. What would be the lowest share that would get her to exert effort? (b) suppose instead that shareholders decided to offer her a bonus if the store earns ,000. Show that this would not get her to work hard.

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