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Juanita sells bottled water from a small stand by the beach. On the last day of summer vacation, many people are on the beach, and
Juanita sells bottled water from a small stand by the beach. On the last day of summer vacation, many people are on the beach, and Juanita realizes that she can make a lot more money this day if she hires someone to walk up and down the beach selling water. She finds a college student named Gilberto and makes him the following offer: They'll each sell water all day and split their earnings (revenue minus the cost of water) equally at the end of the day. Juanita knows that if they both work hard, Gilberto will earn $100 on the beach and Juanita will earn $200 at her stand, so they will each take home half of their total revenue: $100+$2002=$150 . It turns out that Juanita's friend Carrue is unavilable that day, so Juanita cannot find a reliable person to watch Gilberto. Which of the following arrangements will ensure that Gilberto works hard without making Juanita any worse off than she is when Gilberto shirks? Make Gilberto promise to work hard Allow Gilberto to keep 71% of the revenue from the bottles of water he sells instead of 50% Pay Gilberto $20, regardless of how many bottles of water
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