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1. Suppose the wage rate is w = 1. An agent is working 6 hours per day and consumes 5 units of goods per day. Suppose that the agent claims to be indifferent between his current situation or working one more hour in exchange for two additional units of consumption. Is this agent maximizing is utility? Why? Should he be working more hours? or fewer?
Principle Agent Problem [Dealing with hidden action] Assume that the employer (principle) wants its employee (agent) to work hard [You can safely assume that this maximizes th
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