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EconomicsQuestion is- If gus pays gene a daily fixed daily wage w=$500 how mich effort will gene put in? Gene manages a Cinnabon store owned
EconomicsQuestion is- If gus pays gene a daily fixed daily wage w=$500 how mich effort will gene put in?
Gene manages a Cinnabon store owned by Gus. Gene's utility function is given by U = w -1000e2 where w is his wage and e represents his effort of running the store. The store's revenue depends on his effort and on random factors. There is a probability p = 0.5 + e of making a $1,000 daily profit and a probability 1 - p = 0.5 -e of making a zero profitStep by Step Solution
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