18) Consider a firm using an efficient wage we to pay each employee it hires. The firm assumes each employee's benefit from engaging into moral hazard on the job is B = 2. The firm can monitor each employee at a cost of M(8) = 882 where 8 is the probability of finding an employee engaging into moral hazard on the job. Each employee can find an outside job in a perfectly competitive labour market where the equilibrium wage is w* = 2. For each employee, the firm minimizes the sum of its monitoring cost and wage subject to satisfying the employee's incentive compatibility constraint. Determine the value taken by the efficient wage. 19) Consider a firm using an efficient wage wg to pay each employee it hires. The firm assumes each employee's benefit from engaging into moral hazard on the job is B. The firm can monitor each employee at a cost of M(8) where 8 is the probability of finding an employee engaging into moral hazard on the job. Each employee can find an outside job in a perfectly competitive labour market where the equilibrium wage is w*. For each employee, the firm minimizes the sum of its monitoring cost and wage subject to satisfying the employee's incentive compatibility constraint . Because the economy enters a period of growth, the demand for a labour in the perfectly competitive labour market increases. Determine how the firm should adjust its wage We a) Increase; b) Decrease: c) Keep constant 4 20) Consider a firm using an efficient wage wg to pay each employee it hires. The firm assumes each employee's benefit from engaging into moral hazard on the job is B. The firm's marginal monitoring cost per employee is M' (8) = a8 where is the probability of finding an employee engaging into moral hazard on the job and a > 0 is a constant. Each employee can find an outside job in a perfectly competitive labour market where the equilibrium wage is w. For each employee, the firm minimizes the sum of its monitoring cost and wage subject to satisfying the employee's incentive compatibility constraint. Because of the introduction of a new surveillance technology, the marginal monitoring cost per employee decreases to b8 where b is a constant such that a > b > 0. Determine how the firm should adjust its wage we: > a) Increase; b) Decrease; c) Keep constant. 21) Consider a firm using an efficient wage wg to pay each employee it hires. The firm assumes each employee's benefit from engaging into moral hazard on the job is Bo. The firm's marginal monitoring cost per employee is M'(8) = a8 where is the probability of finding an employee engaging into moral hazard on the job and a > 0 is a constant. Each employee can find an outside job in a perfectly competitive labour market where the equilibrium wage is w*. For each employee, the firm minimizes the sum of its monitoring cost and wage subject to satisfying the employee's incentive compatibility constraint. Because many employees work at home during the pandemic, the firm believes it is now easier for employees to engage into moral hazard, i.e., believes the benefit from engaging into moral hazard increases from B, to B. Determine how the firm should adjust its wage We. a) Increase: b) Decrease; c) Keep constant