please do a,b,c in 10 minutes will upvote

Question 1 120 pts Problem 1 (70 points) Kate owns a club and considers hiring Tom, who is a DJ. Kate wants the crowd to be entertained because people then spend more money on drinks. The probability of the crowd being entertained is equal to the costly effort e (0,1 of Tom. Assume first that Tom's effort is not observable but whether the crowd is entertained or not is verifiable. If the crowd is entertained, Kate's payoff is r= 1. Otherwise, Kate's payoff is = 0. Tom faces effort costs of c(e) = }e and receives a wage of w(x) = a + bx from Kate, where a is a fixed payment and b is a bonus. A contract specifies a pair (a,b). Both parties are risk neutral and face a reservation utility of 0. a) Suppose the effort e was observable and verifiable. What would be the optimal effort level that Kate would implement? (10 points) From now on, assume that the effort level e is not observable. b) What is this problem of asymmetric information called? (5 points) c) Given a contract (a,b), what is the optimal level of effort for Tom? (10 points) d) State the contract design problem of Kate formally. (10 points) e) Determine the optimal contract (288,658) and briefly interpret the result. (10 points) Regulatory changes require that Tom cannot make any payment to Kate. f) State the new contract design problem of Kate formally. (5 points) g) Will Kate still implement the first-best effort? (5 points) THOUT CO