Pam works at a jewelry kiosk in a mall. Pam doesn't like to work hard, and it costs her $100 to do so. Pam's employer cannot observe whether Pam works hard. If Pam works hard, there is a 90% probability that jewelry profits will equal $400 a day and a 10% probability that jewelry profits will equal $100 a day. If Pam shirks, there is a 90% probability that jewelry profits will equal $100 a day and a 10% probability that jewelry profits will equal $400 a day. Suppose Pam is paid $200 if jewelry profits are $400 a day and $50 if jewelry profits are $100 a day. Pam will _____ because the net gain of _____ from shirking is _____ than the net gain of _____ from working hard.
A) shirk; $50; more; $45
B) shirk; $75; more; $65
C) work hard; $45; less; $185
D) work hard; $65; less; $85

Question

Quizplus · Accepted Answer

The Answer of Pam works at a jewelry kiosk in a mall. Pam doesn't like to work hard, and it costs her $100 to do so. Pam's employer cannot observe whether Pam works hard. If Pam works hard, there is a 90% probability that jewelry profits will equal $400 a day and a 10% probability that jewelry profits will equal $100 a day. If Pam shirks, there is a 90% probability that jewelry profits will equal $100 a day and a 10% probability that jewelry profits will equal $400 a day. Suppose Pam is paid $200 if jewelry profits are $400 a day and $50 if jewelry profits are $100 a day. Pam will _____ because the net gain of _____ from shirking is _____ than the net gain of _____ from working hard.
A) shirk; $50; more; $45
B) shirk; $75; more; $65
C) work hard; $45; less; $185
D) work hard; $65; less; $85

Pam Works at a Jewelry Kiosk in a Mall