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Question 2. Consider a firm designing a two-period, delayed compensation contract for a prospective worker. If the worker declines the firm's offer she may accept

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Question 2. Consider a firm designing a two-period, delayed compensation contract for a prospective worker. If the worker declines the firm's offer she may accept an alternative job paying a salary of 10,000 each period. The worker's VMPE at the firm would be 8,000 in period 1 and 15,000 in period 2. For cash flow reasons, the firm can only afford to pay the worker 6,000 in period 1 under the delayed compensation package. What is the range of second period salaries the firm would be willing to pay such that the firm earns positive profits from the contract and the individual will accept the contract. Assume that the firm has a zero discount rate and the individual has a 10% discount rate

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