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Suppose that the expected value of weekly profits for an ice cream​ shop, before paying the​ manager, Amy, is ​E(pi​)equals500plus12​e, where e is​ Amy's weekly overtime hours. Amy is​ risk-neutral but incurs a cost ​C(e)equalse squared for working overtime.​ Thus, total expected surplus is ​E(S)equals​E(pi​)minus​C(e). What level of effort maximizes total​ surplus? The value of overtime that maximizes total surplus is eequals nothing hours. ​(Enter your response rounded to one decimal​ place.)

User Ozplc
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4 votes

Answer:

6 hours

Step-by-step explanation:

E(s)= 500+12e-e²

dE/de= 12-2e

0 = 12-2e

e=6

A total of 6 hours will maximize surplus

User Evan Bacon
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