Question 2 [6 points] Suppose an entrepreneur owns a firm that has a production technology that generates the following revenue: R(e) = e +100e where revenue depends on his effort level e. The monetary cost of effort is given by C(e) =3e . The entrepreneur is risk neutral and maximixes his expected utility. (a) What is the maximal value (profit) of the firm? [2p] (b) Suppose the entrepreneur sells 100% equity. After selling the firm, what effort level does the entrepreneur choose? What is the value of the firm? [1p] (c) Suppose the entrepreneur sells % equity. What effort level does the entrepreneur choose? Is it efficient? [3p]