Register
Emma Peterson is a worker for ABC Inc. She has an effort cost function of C = 2e^2 and a monthly reservation wage of $3,500. Her wage function is W = 3,500 + 0.4Q. If the incentive coefficient is equal
101k views
0 votes
Emma Peterson is a worker for ABC Inc. She has an effort cost function of C = 2e^2 and a monthly reservation wage of $3,500. Her wage function is W = 3,500 + 0.4Q. If the incentive coefficient is equal to 0.4 then Q = 400e. Q is Emma’s output. Assume that the incentive coefficient increases from 0.4 to 0.5 and Emma’s base salary decreases from $3,500 to $3,000.

a. What will happen to her level of effort?
b. How will this change XYZ Company’s profits?

User SaleCar
by
4.8k points

1 Answer

6 votes

Answer:

a.If p=1 ,the profit of ABC company = 6100

b. The profit of ABC company increased because the effort level increased and the wage rate also increased but the output increased faster than the wage rate .

Step-by-step explanation:

Please see attachment

Emma Peterson is a worker for ABC Inc. She has an effort cost function of C = 2e^2 and-example-1
Emma Peterson is a worker for ABC Inc. She has an effort cost function of C = 2e^2 and-example-2
User Mbillard
by
5.3k points
Ask a Question
Welcome to QAmmunity.org, where you can ask questions and receive answers from other members of our community.

5.4m questions

7.0m answers

Other Questions

Decker Tires' free cash flow was just FCF0 = $1.32. Analysts expect the company's free cash flow to grow by 30% this year, by 10% in Year 2, and at a constant rate of 5% in Year 3 and thereafter. The WACC
For this question, assume that the expected rate of inflation is a function of the past year's inflation. Also, assume that the unemployment rate has been equal to the natural rate of unemployment for
Misk Co. purchased the following securities during 20X7 to be classified as held-to-maturity securities, trading securities, or available-for-sale securities: I. Debt securities bought and held for the
Risa has to work long hours and sometimes weekends, losing out on family time. Risa doesn't find her long hours overly stressful, but rather she sees it as her contribution to maintaining her family's
Which of the following should be considered last when searching for financing? Family members Banks Commercial finance companies Credit cards I'm guessing it's C but idk
Link Copied!