Scenario 17.5 Consider the Following Information

Multiple Choice

Scenario 17.5
Consider the following information:
Income to the firm from workers who sell door-to-door
Bad Luck Good Luck
Low Effort (e = 0) $5,000 $7,000
High Effort (e = 1) $7,000 $13,000
Cost of effort: c = $2500e
Probabilities: Bad luck = .75; Good luck = .25
-Refer to Scenario 17.5. If a fixed wage of $3000 is given the individual worker, the result will be:

A) low effort 75% of the time.
B) low effort 25% of the time.
C) low effort.
D) high effort.
E) high or low effort depending on whether the worker thinks the $3000 is an acceptable wage.