Question
Anna is an employee at Cool Products, Inc. She has an effort cost function of C = 2e 2 and a reservation wage of $4,000.
Anna is an employee at Cool Products, Inc. She has an effort cost function of C = 2e2and a reservation wage of $4,000.
Her compensation package is W = 4,000 + 0.3Q where the incentive coefficient = 0.3 and Q = 400e. Q is the output.
- If the CEO increases the incentive from 0.3 to 0.4, what happens to the Anna's effort?
- If the CEO increases the incentive from 0.3 to 0.4, what happens toCool Products, Inc.'s profit?
Be sure to explain your calculations
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Managing in a Global Economy Demystifying International Macroeconomics
Authors: John E. Marthinsen
2nd edition
128505542X, 978-1305176157, 1305176154, 978-1285055428
