Question: In the duck-carving example with full information (summarized in the second column of Table 19.1), is a contract efficient if it requires Paula to give

In the duck-carving example with full information (summarized in the second column of Table 19.1), is a contract efficient if it requires Paula to give Arthur a fixed-fee salary of $168 and leaves all the decisions to Arthur? If so, why? If not, are there additional steps that Paula can take to ensure that Arthur sells the optimal number of carvings?
Table 19.1: Production Efficiency and Moral Hazard Problems for Buy-A-Duck

Full Information Asymmetric Information Production Production Moral Hazard Contract Efficiency Efficiency Problem Fixed-fee rental contract Rent (to principal) Yes Yes No Hire contract, per unit pay Pay equals marginal cost No Nob Yes Pay is greater than marginal cost No No Yes Contingent contract Share revenue No Yes Nob Share profit Yes Nob Yes

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