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a) Expected profit when Tim is lazy is : 0.6 * $10,000 + 0.4 * $ 20,000 = $14,000 Expected profit when Tim is working Hard : 0.4 * $ 10,000 + 0.6 * 20,000 = $ 16,000 b) If Tim is working hard then he is incurring a personal cost of $ 800 , so the %age profit should be such that he is able to cover this cost. and therefore %age profit should be 5% c) We are currenlty facing problem of adverse selection after hiring we will have a probelm of moral hazard. ...