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A firm sells its output Q for a price of p=1. It pays a piece wage w to its single worker. Its worker produces
A firm sells its output Q for a price of p=1. It pays a piece wage w to its single worker. Its worker produces Q(e)=4e units of output, where e is the worker's effort. The cost of effort is C(e)= 2e. The worker is free to choose any level of effort, including 0. The worker's outside option is 0. Treat all variables as continuous. What wage does the firm pay?
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Labor Economics
Authors: George J. Borjas
6th edition
73523208, 2900073523209 , 978-0073523200
