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A risk neutral principal hires a risk neutral agent to work on a project. The project can either yield high output h or low output l. The probability of h depends on the agent’s unobservable effort e. With probability 1 − e the output is low. The agent is protected by limited liability, so his compensation can never go below zero. Let t(h) and t(l) be the agent’s compensation as a function of the output. The agent’s outside option is zero and the cost of effort function is c(e) = e2/2. The principal offers to the agent a contract that maximizes the principal’s expected profit subject to the incentive compatibility, limited liability and participation constraints.
Find the optimal contract
find the country with largest budget deficit and largest budget surplus in this list the budget deficit is called the Budget Balance.
Suppose the Fed conducts an open market purchase by buying $10 million in Treasury bonds from Acme Bank. Sketch out the balance sheet changes that will occur as Acme converts the bond sale proceeds to new loans.
The income elasticity of demand for your firm’s product is estimated to be 0.75. A recent report in The Wall Street Journal says that national income is expected to decline by 3 percent this year. What should you do with your stock of inventories?
Select any four of the six summary statements and explain in detail the significance and possible causes of each item. Be sure to use the economic concepts and polices discussed in your textbook where applicable. Identify possible economic policie..
Illustrate what the assignment should include. The bureau of labor statistics reported that in the second quarter of 2008 the working age population.
Research any two publicly traded companies, looking for one that has an attractive price earnings ratio and one that has an unfavorable price earnings ratio. Explain how you knew the price earnings ratio was attractive and unfavorable.
Nudge theory is mainly concerned with the design of choices which influence the decisions we make. According to the theory, what factors should we consider when designing choices?
Opponents of NAFTA point out that pollution is largely a free good in Mexico also that being free to pollute gives industries in Mexico an economic advantage over those in the U.S. also Canada.
With vertical integration in a monopolized environment: When a new baseball team enters a league, the effect on nearby teams is to: The true cost of monopoly power to society is attributable to: Natural monopolies are distinguished by
Net exports are
Is the perfectly competitive model a good benchmark for an economic system which uses Biblical worldview? Use Scriptural support where appropriate and also comment on the perfectly competitive model as a guide for public policy. What should be the ro..
In a paper, analyze the impact of changes in the federal minimum wage on employment, the individual, family and household incomes, and the future of employment wages. Provide specific examples to support your findings and justify your ideas.
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