please answer a-e

Question 4 - Incentives over the Career (25p) Suppose a person works for a firm in two periods (each period is 20 years) and then retires. The person can work with high or low effort. Exerting high effort, the worker produces a value for the firm of $55,000 per period Working with high effort results in disutility for the worker of $7,000 per period Exerting low effort, the worker produces a value for the firm of $40,000 per period . Working with low effort results in no/zero disutility The person can also work for another firm and earn $40,000 per period while exerting low effort a) (5p) Given that the firm knows the worker's output and have full flexibility to set the pay level so as to optimize incentives, what is the optimal salary (range) for the firm? Assume that: The salary is $50,000 in period 1, regardless of effort The salary is $45,000 in period 2, regardless of effort The worker can be fired for exerting low effort in period 1 b) (5p) What effort level will the worker choose for each period, and what will be the total salary? New scenario, assume that: The salary is $10,000 in period 1, regardless of effort The salary is $80,000 in period 2, regardless of effort The worker can be fired for exerting low effort in period 1 c) (5p) What effort level will the worker choose for each period, and what will be the total salary? d) (5p) How much must the firm pay in period 2 for the worker to exert high effort? e) (5p) What will be the profit to the firm if the worker exerts high effort in both periods? Question 4 - Incentives over the Career (25p) Suppose a person works for a firm in two periods (each period is 20 years) and then retires. The person can work with high or low effort. Exerting high effort, the worker produces a value for the firm of $55,000 per period Working with high effort results in disutility for the worker of $7,000 per period Exerting low effort, the worker produces a value for the firm of $40,000 per period . Working with low effort results in no/zero disutility The person can also work for another firm and earn $40,000 per period while exerting low effort a) (5p) Given that the firm knows the worker's output and have full flexibility to set the pay level so as to optimize incentives, what is the optimal salary (range) for the firm? Assume that: The salary is $50,000 in period 1, regardless of effort The salary is $45,000 in period 2, regardless of effort The worker can be fired for exerting low effort in period 1 b) (5p) What effort level will the worker choose for each period, and what will be the total salary? New scenario, assume that: The salary is $10,000 in period 1, regardless of effort The salary is $80,000 in period 2, regardless of effort The worker can be fired for exerting low effort in period 1 c) (5p) What effort level will the worker choose for each period, and what will be the total salary? d) (5p) How much must the firm pay in period 2 for the worker to exert high effort? e) (5p) What will be the profit to the firm if the worker exerts high effort in both periods