Essay
Always Round Tire hires Plain Truth Advertising to write copy for its newspaper advertisements.Always Round has a demand for advertising of MB = 400 − 2S where S is the number of hours that Plain Truth works.If Plain Truth has a fixed supply cost given by MC = $150 per hour,what are the number of hours that Always Round purchases from Plain Truth under the assumption of costless monitoring? How much is the contract worth to Always Round? If Always Round offers half of the surplus to Plain Truth as an incentive,how much is Plain Truth paid for the job?
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