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1. Consider the cost-volume-profit structure proposed above.

a. What is the profit remaining for other participants after Ishmael gets his 1/50th share,supposing that they retrieve 1,200 barrels?

b. What is the profit remaining for other participants after Ishmael gets his 1/50th share,supposing that they retrieve 5,000 barrels?

c. What is the expected profit remaining for other participants after Ishmael gets his1/50th?

2. We can imagine that Ishmael might request a fixed wage rather than a share of profits. Forexample Ishmael might try to bargain for fixed wages of $520 and forego the share of profits.This would raise the fixed cost of the voyage to $5,520, and the variable cost per barrel wouldbe unchanged.

a. What is the profit remaining for other participants with Ishmael getting a fixed $520 forthe voyage supposing that they retrieve 1,200 barrels?

b. What is the profit remaining for other participants with Ishmael getting a fixed $520 forthe voyage supposing that they retrieve 5,000 barrels?

c. What about at 3,000 barrels?d. What would be the expected profits remaining to other participants if Ishmael were tomake this bargain to take the fixed $520?

3. What seems to be the captain's and ship's outfitter's motivation for making all the participants,including the crew members, take a share of profits rather than giving a fixed wage? Is the motivation to build an incentive to work hard with a pay-for-outcome regime? Is the motivation risk-sharing?

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