Rina sells bottled water from a small stand by the beach. On the last day of summer vacation, many people are on the beach, and Rina 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 Musashi 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. Rina knows that if they both work hard, Musashi will earn $80 on the beach and Rina will earn $160 at her stand, so they will each take $80+$160 home half of their total revenue: $120. If Musashi shirks, he'll generate only $50 in earnings. Rina does not know that Musashi estimates 2 his personal cost (or disutility) of working hard as opposed to shirking at $20. Once out of Rina's sight, Musashi faces a dilemma: work hard (put in full effort) or shirk (put in low effort). In terms of Musashi's total utility, it is worse for him to Taking into account the loss in utility that working hard brings to Musashi, Rina and Musashi together of working hard. better off if Musashi shirks instead Rina knows Musashi will shirk if unsupervised. She considers hiring her good friend Carrie to keep an eye on Musashi. The most Rina should be willing to pay Carrie to supervise Musashi, assuming supervision is sufficient to encourage Musashi to work hard, is . It turns out that Rina's friend Carrue is unavilable that day, so Rina cannot find a reliable person to watch Musashi. Which of the following arrangements will ensure that Musashi works hard without making Rina any worse off than she is when Musashi shirks? Pay Musashi $70, regardless of how many bottles of water he sells Allow Musashi to keep 70% of the revenue from the bottles of water he sells instead of 50% Make Musashi promise to work hard 74F Partly cloudy