You run a successful business and decide to take a year off to travel. As a result, you need to hire a manager for the next year (just for a single period). If its a good year, your business will earn $250. If its a bad year, the business will only earn $200. You want to hire a manager and pay them a straight salary of $60.

You hire a manager who has a reservation utility of 7.00. Their disutility of effort for working hard is 0.75 and their disutility of effort for shirking is 0.60. The probability that your business will earn $250 is 70% if the manager works hard. This probability decreases to 35% if the manager doesnt work hard. You are risk neutral and the manager you hire has a utility function equal to the square root of x (or ). Will the manager work hard or shirk? Explain. What will be your utility be in this situation?