An employer and a worker, if both are honest and work hard, together produce $200,000 a year, of which the employer gets $50,000 and the worker $150,000. If either one is dishonest and lazy, they break up, the employer employs someone else and the worker gets another employer. The following shows what they might earn if they broke up. In which case is it likely that both the employer and the worker will be honest and hard working?

Question

Quizplus · Accepted Answer

In order for both the employer and the worker to be honest and hard working, they need to maximize their joint earnings. From the given information, we know that when both are honest and work hard, they jointly produce $200,000, with the employer earning $50,000 and the worker earning $150,000.

If they break up and the employer makes $25,000 while the worker makes $125,000, their joint earnings would be $150,000, which is less than what they would earn if they were both honest and hard working. Therefore, it is in both of their best interests to remain honest and hard working in order to earn the highest joint earnings possible.

The other options presented all result in at least one of them earning significantly less if they break up and work with someone else, which provides a greater incentive for one or both of them to be dishonest or lazy. Therefore, option D is the best choice.

An Employer and a Worker, If Both Are Honest and Work