Shay Is Risk Averse and Has a Reservation Wage of $50.She

question 6

Multiple Choice

Shay is risk averse and has a reservation wage of $50.She is offered two different labor contracts.One is a fixed wage of $100 per day,and the other is a piece-rate contract.In the latter,the pay rate is $1 per piece.In a good day she sells 160 units,and in bad day she sells 40 units.The likelihood of a good or a bad day is 50%.

• A) Shay accepts the fixed wage contract.
• B) Shay declines both contracts.
• C) Shay accepts the piece-rate contract.
• D) Shay is indifferent between both contracts.

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Financial obligations or debts that a company or individual owes to others, which must be settled over time.

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Entities or individuals to whom money is owed.

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