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Assume the fixed wage contract provides a salary of $10. The manager's net return, Y, is this salary minus the cost of effort. a) With

Assume the fixed wage contract provides a salary of $10. The manager's net return, Y, is this salary minus the cost of effort. a) With high effort the manager gets the highest net return.

b) If the manager maximizes the net return, we expect low effort to be chosen.

c) Medium effort would generate losses for the manager.

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