Zhihua and Pu are partners in a store in which they do all the work They split the stores business profit equally (ignoring the opportunity cost of their own time in calculating this profit) Does their business profit sharing contract give them an incentive to maximize their joint economic profit i...

A partner who works an extra hour bears the full opportunity cost of thi ...

Zhihua and Pu are partners in a store in which they do all the work. They split

Question:

Zhihua and Pu are partners in a store in which they do all the work. They split the store’s business profit equally (ignoring the of their own time in calculating this profit). Does their business profit-sharing contract give them an incentive to maximize their joint economic profit if neither can force the other to work?

Opportunity Cost
Opportunity cost is the profit lost when one alternative is selected over another. The Opportunity Cost refers to the expected returns from the second best alternative use of resources that are foregone due to the scarcity of resources such as land,...