Use the following to answer question:
Figure 16.4
-(Figure 16.4) If the principal chooses a flat salary, the agent will _____ and earn a payoff of _____.
A) shirk; 150
B) shirk; 75
C) work hard; 133
D) work hard; 100

Question

Use the following to answer question:
Figure 16.4 
-(Figure 16.4) If the principal chooses a flat salary, the agent will _____ and earn a payoff of _____.
A) shirk; 150 
B) shirk; 75 
C) work hard; 133 
D) work hard; 100

Quizplus · Accepted Answer

If the principal chooses a flat salary, the agent will shirk because there is no incentive to work hard, and the payoff for shirking is 150.

Use the Following to Answer Question