1. There are two effort level for the ag and they are e\

1. There are two effort level for the agent and they are eH, eL. For the agent the cost for high effort is 500 and the cost for low effort is 0. The reservation utility for the agent is 500. When the agent is working for the principal, there can be three levels of profit = The principal is and they are (XIX2X3) risk neutral and the agent is risk averse. The agent's utility from the wage, w, would be n. The agent's total utility would be u = c(ek) where k = H, L. When the effort level is high the probabilities that each result would happen are (P1 , , P3) = 111 111 (-,- -). When the effort level is they are (m, P2, P3) = ( 4) (1) In the ideal case where the principal can observe the effort level ofthe agent, what will be the wage system like? In other words, what will be (WIW2W3)? (2) Ifthe principal cannot observe the effort level of the agent, what will be (WIW2W3)? And what will be the effort level of the agent in that case? What will be the profit of the principal?