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Dear Sir,
Could you please explain the answer to question 77 as I do not understand the explanation/solution.
Why will the company not be willing to pay 12.50?
Thank you very much
If they pay $12.50 then they would end up with the same total contribution i.e. they would be no better off (and no worse off). So there would not be much point.
So they will pay anything up to $12.50. For every $0.01 below $12.50 they will make an extra $0.01 total contribution.
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