1st drop down menu: highest, second-highest, lowest

2nd drop down menu: $1,$2,$3

2. Incentive pay contracts Crystal is a manager who is trying to decide how to structure the pay of her worker Brian in a way that maximizes the total surplus (the revenue from the output minus the effort cost to the worker). Crystal wants Brian to exert the maximum amount of effort, but she has no good way of directly monitoring how hard he works. Crystal considers the following incentive schemes that condition the worker's pay on the number of nondefective units the worker produces per hour, which the manager is able to observe. Scheme 1 (S1): Pay the worker a flat hourly wage of $50 regardless of his effort Scheme 2 (S2): Pay the worker $30 per hour plus $0.50 per nondefective unit he produces Scheme 3 (S3): Give the worker $1.00 per nondefective unit, but no base payment On the following graph, use the purple line (diamond symbol) to ploe the worker's pay as a function of nondefective units produced under the first contract scheme (51), then use the blue line (arde symbol) to plot the pay according to the second scheme (52), and Finally use the orange Wine (square symbol) to plot the pay according to the third scheme (SJ). 100 31 70 32 50 WORKER PAY Dollars per hour) 0 40 13 30 20 10 0 0 10 100 30 40 50 60 70 80 NONDEFECTIVE UNITS Per hour) power least effectively aligns the worker's incentives with those of the manager; therefore, contract The contract scheme with the scheme is the least efficient Suppose Edison works in construction alongside his supervisor who checks in with him constantly. Hilary works for Dunder Miffin, doing an assortment of poorly defined general office tasks. She sees her supervisor at coffee breaks but rarely discusses work directly with her. Which of these workers is more likely to be paid an efficiency wage? Edison Hilary What is the name for this economic phenomenon studied in this question? Moral hazard Adverse selection