Note: This question falls under "Risk Analysis and Adverse Selection"

U = c.5 Abigail has the utility function in compensation and the utility function in compensation Expected profit will increase from $50,000 to if she doesn't work hard. if she does work hard. U = C0.5-2 = $52,500 if she works hard. $50,000 The manager receives compensation C equal to $400 plus a portion x of any profit in excess of What is the value of x that will make the manager indifferent between shirking and working hard? U = c.5 Abigail has the utility function in compensation and the utility function in compensation Expected profit will increase from $50,000 to if she doesn't work hard. if she does work hard. U = C0.5-2 = $52,500 if she works hard. $50,000 The manager receives compensation C equal to $400 plus a portion x of any profit in excess of What is the value of x that will make the manager indifferent between shirking and working hard