In order for you to start a small business, 1 manager (adopt reservation wage from savings) and 1 staff (adopt with no reservation wage) is needed….
Need help answering this activity. Please provide detailed answers and correctly labelled graphs.
In order for you to start a small business, 1 manager (adopt reservation wage from savings) and 1 staff(adopt with no reservation wage) is needed. 1. Enumerate the job responsibilities, working terms and conditions (no. of working hours, benefits, etc] that will be contained in their contracts. Specify situations why these contracts will be incomplete basedon the ideas of asymmetric information and principal-agent problem. 2. Examine the Philippine labor market and find out the anticipated salaries of your potential managerand staff. Based on your findings, model the Nash equilibrium (efficiency wage) per employee. Explainhow you came up with your best response curve (you can assume the effort level based onobservation/experience and reservation wage) and isocost line. Present them graphically (2 correctlylabelled graphs). 3. Calculate for the manager’s employment rent given that his reservation wage will only last him sixmonths. What happens to his efficiency wage when the government approves a law that unemploymentbenefit will be given to unemployed citizens? Explain and illustrate graphically (correctly labelled).
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