Question: 4. Consider a worker who can exert effort e either equal to 0 or 1 (i.e. no effort or some effort). Suppose that the worker

4. Consider a worker who can exert effort e either equal to 0 or 1 (i.e. no effort or some effort). Suppose that the worker has some cost of effort c and that the principal can't observe their effort. If the worker chooses e = 0, then the firm's profit will be 10 with probability, and 0 with probability 1- q. If the worker chooses e = 1 then the firm's profit will be 10 with probability p > q and 0 with probability 1 - p q and 0 with probability 1 - p

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