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Bagel Corp has used a frequent buyer program whereby a consumer receives a stamp each time she purchases one dozen bagels for $6. After a

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Bagel Corp has used a frequent buyer program whereby a consumer receives a stamp each time she purchases one dozen bagels for $6. After a consumer accrues 10 stamps, she receives one dozen bagels free. This offer is an unlimited offer, valid throughout the year. The manager knows her products are normal goods. Given this construct the budget set for a consumer who has $200 to spend on bagels and other goods throughout the year. Does Einstein's frequent buyer program have the same effect on the consumption of its bagels that would occur if it simply lowered the price of one dozen bagels by 3 percent? No - the budget sets will be different. Ves - both result in the same budget set. Suppose that a CEO's goal is to increase profitability and output from her company by bolstering its sales force and that it is known that profits as a function of output are TT = 40q - 2q2 (in millions of U.S. dollars). The company's profit function is graphed below. Determine the output and profits one should expect to observe using the following compensation schemes. (Assume that sales managers view output and profits as "goods"): The company compensates sales managers solely based on output. Output is between 0 and 10, and profits are between $0 and $200. O Output is 20 and profits are 0. Output is between 10 and 20, and profits are between $0 and $200. Output is 10 and profits are $200. The company compensates sales managers solely based on profits. Output is between 10 and 20, and profits are between $0 and $200. O Output is 10 and profits are $200. Output is between 0 and 10, and profits are between $0 and $200. O Output is 20 and profits are $0. The company compensates sales managers based on a combination of output and profits. Output is between 10 and 20, and profits are between $0 and $200. O Output is 10 and profits are $200. Determine the output and profits one should expect to observe using the following compensation schemes. (Assume that sales managers view output and profits as "goods"): The company compensates sales managers solely based on output. Output is between 0 and 10, and profits are between $0 and $200. O Output is 20 and profits are 0. Output is between 10 and 20, and profits are between $0 and $200. Output is 10 and profits are $200. The company compensates sales managers solely based on profits. Output is between 10 and 20, and profits are between $0 and $200. O Output is 10 and profits are $200. Output is between 0 and 10, and profits are between $0 and $200. O Output is 20 and profits are $0. The company compensates sales managers based on a combination of output and profits. Output is between 10 and 20, and profits are between $0 and $200. O Output is 10 and profits are $200

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