Imagine a street vendor who reports to a boss. Depending on how hard the street vendor works, no sale (reventues equal to zero), good sale (revenues equal to 100) and excellent sale (reventies equal to 400 ) are likely according to the following probabilities: Assume that working hard has a cost of effort of 25 for the street vendor; also assume that the street vendor has another job opportunity, which involves no risk and pays 81 (so that he will never accept a contract that gives him expected utility less than 81). a) Compute the expected profits for the boss if the street vendor puts in a high level of effort; [12,5Marks] b) Compute the expected profits for the boss if the street vendor puts in a low level of effort; [12,5 Marks] c) Is there any contract that the boss will be happy to sign that could induce the street vendor to put in a low level of effort? [12,5 Marks] d) Stuppose the boss proposes to the street vendor "if you make no sale, you pay me 164. If you make a good sale, you pay me 64 . If you make an excellent sale, you will be paid 236 pounds". Will the street vendor sign such a contract and if so which level of effort will he choose? [12,5Marks] Imagine a street vendor who reports to a boss. Depending on how hard the street vendor works, no sale (reventues equal to zero), good sale (revenues equal to 100) and excellent sale (reventies equal to 400 ) are likely according to the following probabilities: Assume that working hard has a cost of effort of 25 for the street vendor; also assume that the street vendor has another job opportunity, which involves no risk and pays 81 (so that he will never accept a contract that gives him expected utility less than 81). a) Compute the expected profits for the boss if the street vendor puts in a high level of effort; [12,5Marks] b) Compute the expected profits for the boss if the street vendor puts in a low level of effort; [12,5 Marks] c) Is there any contract that the boss will be happy to sign that could induce the street vendor to put in a low level of effort? [12,5 Marks] d) Stuppose the boss proposes to the street vendor "if you make no sale, you pay me 164. If you make a good sale, you pay me 64 . If you make an excellent sale, you will be paid 236 pounds". Will the street vendor sign such a contract and if so which level of effort will he choose? [12,5Marks]