A business wishes to hire a legal firm to provide some legal services. The marginal benefit to the business from the legal services is MB = 210 - q, where q is the quantity provided. The marginal cost to the legal firm is MC = 2q. The issue is that is difficult to contract on the quantity of legal services provided. The business can spend $100 on monitoring and the legal firm can spend $100 on a recording its efforts. Even with these expenditures, a court cannot distinguish the difference between a q- 60 and the efficient level of q. In this case, what is the total agency cost?
