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Contracting-agent indifference curves

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Contracting: agent indifference curves. An agent has production costs given by:C(q) = 10 · q 

The agent is risk-neutral so his utility from accepting a payment t to produce q unitsis:UA = t - C(q) 

Do the following:(a) For each of the contracts listed below, compute the agent's utility under thecontract. Identify whether the agent will accept or reject the contract.

i. q = 8, t = 80

ii. q = 8, t = 120

iii. q = 12, t = 120

iv. q = 12, t = 80

(b) On a set of axes with q on the horizontal axis and t on the vertical axis, plot each of the contracts above and draw the corresponding indifference curves. Clearly label the region in which no contract offers will be accepted.

Reference no: EM131249560

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